I hope everyone had a good weekend! Thank you to our veterans and those currently serving in our armed forces. We appreciate everything you do around the world to keep us safe.
Our thoughts are also with those affected by the tragedies in California. If you’re being affected by the wildfires right now, we have a list of resources you may find helpful.
It was a big week for the markets. Any time there’s a Federal Reserve meeting on short-term interest rates, people stand up and take notice. Before we get there though, let’s discuss a few other data points that came out.
Headline News
MBA Mortgage Applications
Overall mortgage applications were down 4% last week as the average rate on a 30-year-fixed conforming mortgage was up four basis points to come in at 5.15%. This is the highest the right has been in the survey since April 2010.
Purchase applications were down 5% and applications to refinance fell 3%. Those looking to refinance represent just 39.1% of the market.
Jobless Claims
Initial jobless claims were down 1,000 last week to settle at 214,000. While the four-week average has been slightly higher compared to this point in October because of the effects of Hurricane Michael, claims in Florida and Georgia continued to drop. The four-week average fell last week by 250 claims to 213,750 claims.
Continuing claims for unemployment were down 8,000 last week to 1.623 million. Meanwhile, the four-week average of continuing claims was down 7,500 to 1.633 million. Both of these represent lows not seen since the summer of 1973.
Producer Price Index (PPI)
The prices paid by producers were up quite a bit in the month of October, rising 0.6%, which was well above analyst estimates for a 0.2% increase. On the year, inflation for the makers of goods and services has risen 2.9%. This is an important number to keep track of because increases in prices paid by producers tend to lead to rising costs for consumers down the line.
The increases were fairly broad-based when food and energy were taken out, prices were still up 0.5% and 2.6% annually. The drop was a little more pronounced when trade services were removed from the equation as the gain went to 0.2% on the month, but even here, inflation has still risen 2.8% on the year.
Let’s take a closer look at a few of these individual categories. The price of food was up 1% on the month, but it’s still down 0.7% on the year. Energy prices are up 12.5% on the year after rising 2.7% in October. However, the price of oil is going down recently, so it will be interesting to see what happens in the November reading. Meanwhile, trade services have only gone up 1.5% overall on the year.
Construction costs are up 1.9% on the month and 4.7% on the year in an industry that continues to show the effects of tariffs. The price of finished services was up 0.6% in 2.5% since the same time last year. Meanwhile, finished goods were up 0.7% and 3.4%, respectively. Finally, consumer goods prices saw a 1% rise on the month and 3.9% annually.
Consumer Sentiment
In the preliminary reading from November, consumer sentiment fell 0.3 points to 98.3 overall in a number that was still 0.3 points higher than expectations. The current conditions component came in a higher at 113.2, which helped to partially offset a 1.6-point drop for expectations which came in at 88.7, which is still reflective of a strong future in the labor market.
Consumers were of two minds when it came to inflation in this reading. On one hand, their expectations for inflation over the next year were down 0.1% to 2.8%. However, over the next five years, expectations were 0.2% higher at 2.6%.
Mortgage Rates
The Federal Reserve chose not to raise short-term interest rates. This was expected, although nothing in the statement brought analysts to believe they won’t be raising the rates in December as the market has also been expecting. The statement put out at the end of the meeting painted a fairly rosy picture of the economy.
Although the mortgage rates in Freddie Mac’s survey were collected before the announcement, bond traders clearly believe that sunny outlook because they’ve been pulling money out of bonds and putting it into stocks recently. Mortgage rates hit highs not seen in seven years last week. If you’re looking for a house or want to take cash out of your current home, it’s a great time to lock your rate.
The average rate on a 30-year fixed mortgage was up 11 basis points to 4.94% with 0.5 points paid in fees. This is up from 3.9% at the same time a year ago.
In shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points was up 10 basis points to 4.33%. This has risen from 3.24% last year.
Finally, for a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM), the average rate was 4.14% with 0.3 points paid, up 10 basis points on the week. A year ago, the rate was 3.22%.
Stock Market
The stock market did post gains for the week, Friday notwithstanding. As for Friday, drops in oil prices have traders and analysts fearing the global economy is slowing somewhat.
Given that news to end the week, your portfolio might be feeling it if you were invested in Exxon Mobil or BP, but most of the market has done fairly well. Are you in the game in our Fantasy Stock League?
The Dow Jones Industrial Average was down 201.92 points on the day to close at 25,989.3, still up 2.84% on the week. Meanwhile, the S&P 500 closed at 2,781.01, down 25.82 points on the day, but up 2.13% on the week. Finally, the Nasdaq was up 0.68% on the week after finishing Friday at 7,406.9, down 123.98 points on the day.
The Week Ahead
Monday, November 12
In observance of Veterans Day, the bond market and some banks are closed today.
Tuesday, November 13
Quicken Loans Home Price Perception Index (HPPI) (10:00 a.m. ET) – Quicken Loans 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 at 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, November 14
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, November 15
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
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, November 16
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
There’s a fair amount going on next week. We’ll have it all covered for you in next Monday’s Market Update.
If economic data and mortgage rates have your mind wandering on a Monday afternoon, we’ve got plenty of other home, money and lifestyle content to share with you if you subscribe to the Zing Blog below. This week, our Molly Grace writes about what your parents didn’t tell you about living on your own. Have a great week!
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