Stock Market Continues to Drop – Market Update

I’m a big baseball fan, so the fact that it’s started up again makes me ecstatic, even if Mother Nature hasn’t quite gotten the memo in Detroit yet. My Tigers got off to a slow start, but with a sweep of the Chicago White Sox this past weekend, they’re on a bit of a hot streak at the moment.

Unlike my team, fears of a trade war with China have stocks in a bit of a slump lately. Would they snap out of it last week, and how was the jobs report? Let’s jump right into it.

Headline News

ISM Manufacturing Index

This key report on the manufacturing sector from the Institute for Supply Management came down from a 14-year high in February, falling 1.5 points in March to 59.3, still a very strong number for the month.

New, export and backlog orders were all very strong on the month. Supplier deliveries are taking longer, leading to questions about whether the supply chain can keep up with demand at this point. Input costs are in an eight-year high of 78.1. While hiring is strong at 57.3, it is slightly slower, falling almost two points from last month.

MBA Mortgage Applications

Overall mortgage applications were down 3.3% last week, according to this report from the Mortgage Bankers Association. Despite the average rate on a 30-year-fixed mortgage remaining flat at 4.69%, purchase applications were down 2.0%, and applications to refinance fell 5.0%.

International Trade

The U.S. trade deficit continued to grow, rising $900 million to $57.6 billion in February. In addition, the trade gap was increased by $100 million in January revisions.

When taking a look at the goods gap, there was a 1.6% rise in imported items to $214.2 billion. This rise was enough to completely offset a 2.3% increase in exports to $137.2 billion. There were big increases in imports of food, industrial supplies and capital goods. The only good thing about this is that capital goods imports generally mean good things for U.S. business investment.

Exports on the goods side were led by industrial supplies. There was actually a jump in vehicle exports, which is something rarely seen. Finally, an increase in capital goods exports is a solid indicator for international business investments.

On the services end of things, exports were up to an extremely good $67.3 billion. It’s worth noting that imports of services did rise 2.3% to $47.8 billion.

Jobless Claims

Initial jobless claims were up 24,000 to 242,000 last week. This brought the four-week moving average up 3,000 to 228,250. It’s again been noted that they are having trouble gathering completely accurate data for Puerto Rico and the Virgin Islands due to the aftermath of hurricane season.

On the continuing claims side, these fell 64,000 last week to come in at 1.808 million. This is the lowest that it’s been since December 29, 1973. The four-week moving average of continuing claims came in at about 1.848 million. This is down 13,500 from the prior week.

Employment Situation

There were 103,000 jobs added to the economy via nonfarm payrolls in March. This missed consensus expectations for an increase of 175,000 jobs in the month. The unemployment rate remained steady at 4.1%. January and February payroll revisions lost 50,000 jobs combined.

Nearly all of the jobs were added to private payrolls, which added 102,000 jobs, while the government kicked in just 1,000. The labor force participation rate did tick down just slightly to 62.9%. Average hourly earnings were up 0.3% on the month, and the yearly increase is now at 2.7%. The length of the average workweek remained at 34 hours, 30 minutes.

Looking at individual employment sectors, manufacturing jobs increased by 22,000 in March. Professional and business services hiring was also up 33,000 on the month. The demand for temporary workers was down 1,000 jobs within this component, though.

Other industries seeing decreases in hiring volumes included construction, which was down 15,000, and retail, which dropped 4,000.

Mortgage Rates

Mortgage rates again moved in the right direction this week, according to Freddie Mac’s survey, falling from the second consecutive week. This has been a bit of relief from the recent trend toward higher numbers in the rate column. If you see a rate you like at this point, now’s a good time to jump on the opportunity.

The average rate on a 30-year-fixed conforming mortgage was down four basis points to 4.40% with 0.5 points in fees. At the same time a year ago, the average rate was 4.10%.

Turning to the shorter terms, the average rate on a 15-year-fixed mortgage was down three basis points to 3.87% with 0.4 points. The average rate last year was 3.36%.

Finally, the average rate on a 5-year treasury-indexed adjustable rate mortgage was down four basis points to 3.62% with 0.4 points. The average rate last year was 3.19%.

Stock Market

President Trump threatened more trade and tariffs against China last Thursday. If we’ve learned anything over the last several weeks, it’s that the markets really don’t like the idea of a trade war. So the negative reaction of stock traders was predictable as the major indexes tumbled.

The Dow Jones industrial average fell 572.46 points Friday to close at 23,932.76. It fell 0.71% on the week. Meanwhile, the S&P 500 closed at 2,604.47, down 1.38% on the week and 58.37 points on the day. Finally, the NASDAQ was down 2.10% on the week after falling 161.44 points on the day to close at 6,915.11.

The Week Ahead

Tuesday, April 10

Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.

Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans, the nation’s second-largest retail mortgage lender, releases data every month comparing what people think their homes are worth to appraisals. Similar opinions of value often make for smoother purchase and refinance transactions.

Quicken Loans Home Value Index (HVI) (10:00 a.m. ET) – Quicken Loans also releases data on home values, on both the national and regional levels. Homeowners can gain a perception of whether values are increasing or decreasing and get a better idea of where they stand in terms of equity.

Wednesday, April 11

MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.

Thursday, April 12

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to report the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.

Friday, April 13

Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

It’s a couple of straight weeks of lighter economic data, but we do get some inflation numbers and some housing data to look at this week. We’ll have it all for you next Monday.

Mortgage and economic news probably gets very few people pumped for the rest of the week on a Monday afternoon. Thankfully, we’ve got plenty more home, money and life content you can check out if you subscribe to the Zing Blog below. In celebration of the boys of summer being back on the diamond, here’s an article on creating the ultimate baseball man (or woman) cave. Have a great week!

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