My sister was home from school this weekend and I sat through most of Frozen for the first time. I can see how some of those songs get stuck in the heads of parents by about the 45th time you play them. It was slightly horrifying to realize my sister apparently knew all the words.
Speaking of horrifying, the stock market has had some ugly performances for the last month or so. Would that trend continue or would traders be able to “let it go”?
Headline News
Personal Income and Outlays
Incomes grew very slowly in September, only rising 0.2%, vs. expectations for a 0.4% increase. Despite this, consumer spending was up 0.4%, matching expectations.
On the inflation side of things, prices were up 0.1% overall and 0.2% in core categories. Overall on the year, inflation is up 2% for both of these metrics, which is right on target with where the Federal Reserve would like to see it.
Digging deeper into the numbers, the savings rate for Americans was down 0.2% to 6.2%. Durable goods orders were up 1.4% in what analysts are thinking had to do with strong vehicle sales, as consumers replaced cars after Hurricane Florence. Finally, wages and salaries were only up 0.2%.
S&P CoreLogic Case-Shiller HPI
Home price growth is showing signs of slowing down. Across the 20-city index, prices in August were only up 0.1% on a seasonally adjusted basis. They were completely flat overall. On the year, prices have gone up 5.5%, but this is down from an annual pace of 5.9% in July.
Some of the hotter markets out West are starting to come back to Earth a bit. In Seattle, prices were down 1% on the month despite still growing 9.6% on the year. San Diego saw its markets fall 0.3% and has a much more moderate growth rate at 4.8%.
Prices were up 1.1% in August in Las Vegas. Prices in Sin City are up 13.9% on the year. Washington, DC and New York City are on the other end of the spectrum with only 2.8% yearly price appreciation. Chicago is only doing slightly better, up 2.9% annually.
Consumer Confidence
Consumer confidence was up 2.6 points in October to come in at 137.9. The index is just a shade off all-time highs at this point.
Those saying jobs are hard to get fell by almost 1% to 13.2%. There was also a 1.8% increase in those who say jobs are plentiful, coming in at 45.9%. Keeping on an employment theme, 0.2% more people say that they see more jobs opening up in the next six months at 22.1%. There was also a decrease in the number of people who think there will be fewer jobs opening up, down 0.9% to 11.4%. More people also see their incomes going up in the near future, rising 2.2% to 24.7%.
In terms of inflation, expectations are up 0.1% to 4.8%. Looking at buying expectations, 13.8% of people expect to purchase a car in the near term, while homes were up 0.2% to 6.4%.
More consumers are expecting interest rates to go up, taking a cue from the Fed. The recent stock market roller coaster ride has yet to dampen the enthusiasm for stocks shown by this index as well.
MBA Mortgage Applications
Mortgage applications were down 2.5% overall on the week, as purchase applications fell 2% and refinance applications were down 4%.
The average rate on a 30-year conforming fixed mortgage was flat at 5.11% last week. Purchase applications made up 0.4% more of the market for a total of 60.6%.
Jobless Claims
Initial claims for unemployment were down 2,000 last week to come in at 214,000. Claims from Florida and Georgia, which have been most affected by Hurricane Michael, are steadily falling as well. The four-week average was up slightly, rising 1,750 to 213,750.
Continuing claims were down 7,000 to 1.631 million. The four-week moving average came in at 1.641 million, down 6,250. Both represent 45-year lows.
ISM Manufacturing Index
Manufacturing growth slowed a little bit in October, down 2.1 points to come in at 57.7. This was a miss from the analysts’ estimate for a number of 59.1.
New orders were down 4.4 points, and this is the first time they’ve fallen below 60 since April of last year. Exports were down 3.8 points to 52.2. The comments in the report point to concerns over rising costs and the effects of tariffs, which are increasing import costs. Prices paid for materials were up 4.7 points to 71.6.
Meanwhile, production was down four points to come in at 59.8. Hiring slowed two points to 56.8, a number that nevertheless points to growth.
Employment Situation
There were 250,000 jobs added to nonfarm payrolls in October, easily beating expectations for a 190,000-job increase. The unemployment rate remained at 3.7%.
Of that number, 246,000 of the positions were added in the private sector, with 4,000 jobs added to government payrolls. There were 32,000 jobs added in manufacturing and 35,000 in professional and business services. Meanwhile, there were 30,000 jobs added in construction.
The labor force participation rate was up 0.2% to 62.9% last month as average hourly earnings rose by the same 0.2% figure. On the year, wages are up 3.1%. The average workweek for all Americans remained at 34 hours, 30 minutes.
International Trade
The U.S. trade deficit rose by $700 million in September to come in at $54 billion. Exports were up 1.5%, but this increase was matched by imports.
On the export side, these came in at $212.6 billion. Strong aircraft exports helped increase exported capital goods by $1.1 billion to $47.5 billion. Exports of industrial supplies were also up $2.8 billion to $46.9 billion. This made up for a $1 billion drop in food exports to $11 billion. Analysts think that’s the result of ongoing tariff effects.
Imports increased to $266.6 billion. Consumer goods imports were up $2 billion to $55.4 billion. Capital goods imports were up $2.4 billion at $60.1 billion. This does generally mean good things for business investment.
Mortgage Rates
Mortgage rates were down last week. They’ve been generally going up, so if you’re in the market to buy or refinance, it wouldn’t be a bad idea to lock your rate.
The average rate on a 30-year fixed mortgage with 0.5 points in fees was down three basis points to 4.83% last week. It’s up from 3.94% at the same time a year ago.
In shorter terms, the average rate on a 15-year fixed mortgage with 0.5 points was down six basis points to 4.23%. This has risen from 3.27% last year at this time.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) fell 10 basis points to 4.04% with 0.3 points. Last year, the rate was 3.23%.
Stock Market
Apple announced a range of new products last week; it was a classic case of selling on the news as the company’s shares fell 6.6% and that bled into other tech stocks Friday. Meanwhile, investors reacted positively to President Trump saying the U.S. and China were getting closer to a deal on trade.
We’re in the home stretch of the Zing Blog’s inaugural Fantasy Stock League. It’s not too late to get in. Although there’s a grand prize for the best portfolio at the end of the year, there’s also a price for the best portfolio in each two-month period.
The Dow Jones industrial average was up 2.36% on the week, despite being down 109.91 points Friday to close at 25,270.83. Meanwhile, the S&P 500 finished Friday at 2,723.06, down 17.31 points, but up 2.42% on the week. Finally, the Nasdaq fell 77.06 points to finish at 7,356.99. The index was up 2.65% weekly.
The Week Ahead
Wednesday, November 7
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.
Thursday, November 8
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show 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.
Federal Reserve Rate Decision (2:00 p.m. ET) – The Federal Reserve meets regularly to decide the future of short-term interest rates. Although not directly tied to longer-term rates like those for mortgages, there’s a positive correlation between the direction of these rates and those of mortgages and many other consumer borrowing costs.
Friday, November 9
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.
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.
All eyes will be in the Federal Reserve decision on short-term interest rates. Although the governors are not expected to push an increase through this time around, there’s wide anticipation for a rate hike in December. Analysts will be paying attention to the statement to see if anything changes this view.
If this economic analysis is doing a poor job of keeping you bright-eyed on this Monday afternoon, I definitely understand. The good news is we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to the Zing Blog below.
It no doubt has something to do with all the great food, but Thanksgiving might be my favorite holiday. However, you do have to get the dining room ready for that big feast. Here’s an article on caring for and cleaning your dining room furniture. Have a great week!
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