Happy second day of spring, everyone! At least that’s according to a certain groundhog in Punxsutawney, Pennsylvania. I’m going to go with it because it lines up with my personal philosophy on the seasons, which is the summer starts whenever baseball has its opening day.
Congratulations to Kansas City fans this morning. For the rest of us, hope springs eternal for next year. The stock market could definitely use some hope. It was a bit of an ugly week.
Headline News
But before we get there, let’s talk about the other economic headlines, .1
New Home Sales
New homes sales were down 0.4% to 694,000 in December. Expectations had been for an increase to 728,000. Supply was up 5,000 to 327,000 on the month. Relative to sales, supply increased from 5.5 to 5.7 months, a step toward further balance.
The median price was up 3.3% to $331,400, only up 0.5% on the year. The 3-month average of new homes sales is 699,000.
Durable Goods Orders
New orders of durable goods were up 2.4% on the month, but that number is a little bit deceptive. When taking on transportation, orders were down 0.1% and orders of core capital goods fell 0.9%.
A primary reason for the surge in transportation orders was a major uptick in orders of aircraft, which tend to be extremely volatile. Defense aircraft orders were up 168%, which more than offset a 74.7% decline in civilian aircraft orders. Motor vehicles were down 0.9%.
New orders overall were down 2.5% when defense goods were excluded. Primary metals were down 0.6%, while electrical equipment was also down 0.6%. Shipments of core capital goods were also down 0.4%.
S&P CoreLogic Case-Shiller HPI
Home prices were up 0.5% in November, according to the 20-city index for the S&P. When taking on seasonal adjustments though, home prices were only up 0.1%. The good news is there was an uptick in annual appreciation as prices were up 2.6% year-over-year in comparison to 2.2% in November.
Consumer Confidence
Consumer confidence was up 3.4 points to 131.6. December numbers were also revised upward to 128.2. The strength was really in jobs numbers.
There were 1.4% fewer people who said that jobs were hard to get, settling at 11.6%. Meanwhile, 2.5% more people are thinking of jobs as plentiful, leading up to 49%. Over the next 6 months, more people expect jobs to open up, up 1.7% to 17.2%. Finally, the number of those seeing fewer jobs on payrolls was down 0.5 points to 13.4%.
Looking at stock market expectations, more people expect the market to go up, increasing 5% to 43.1%. Meanwhile, 6% fewer people are pessimistic about the stock market. Bears are only at 22.2%. Buying plans for cars and trucks were down, but more people expect to buy homes and appliances in the months ahead. Income expectations were pretty flat, with only slightly fewer people seeing their income going up in the next 6 months.
MBA Mortgage Applications
Overall mortgage applications were up 7.2% on the week as purchase applications increased 5% and applications to refinance were up 8%.
Unemployment remains low and the average rate on a conventional 30-year fixed mortgage was down six basis points to 3.87%.
International Trade In Goods
The trade deficit increased by $5.3 billion in December to $68.3 billion for the U.S. Exports were up 0.3%, but it wasn’t enough to make up for a 2.9% increase in imports, probably associated with the holiday season.
Industrial supplies imports were up, and there was a 1.2% uptick in imports of consumer goods. On the export side, capital goods were up 0.4%, while industrial supply exports rose as well. Part of the U.S. trade deal was for more exports of U.S. agricultural products to be bought by China. These were flat. It’ll be something to watch closely in the months ahead
Imports are down 4.9% on the year, but exports are only up 0.7%. The good news is food exports are up 7.8% overall.
Pending Home Sales Index
The number of homes under contract for sale fell 4.9% in December to an index level of 103.2. The expectation had been for a 0.4% uptick. This likely means bad things for upcoming reports on sales of existing homes, but we’ll see. All regions saw decreases.
Gross Domestic Product
GDP was up 2.1% from the fourth quarter in the first estimate. This was right in line with expectations. It does represent a slowing of growth compared to where GDP has been in recent years.
Real consumer spending after inflation was up 1.8% on a seasonally-adjusted basis, while overall prices were up 1.4% according to this measurement.
Exports contributed 1.48 points to overall GDP growth. Imports were down and contributed most of the positive impact here as opposed to an increase in exports. However, there was a 1.09% downturn in inventories, which is a sign that businesses may be preparing for a possible slowdown in the future. Business investment has only got 1.5% on the year and took away 0.2% from overall GDP.
Government spending was up 2.7% and added 0.47% to the overall headline.
Jobless Claims
Initial jobless claims were down 7,000 to come in at 216,000. Meanwhile, the 4-week moving average of continuing claims was down 1,750 to 214,500.
Meanwhile, continuing claims were down 44,000 last week to come in at 1.703 million. Finally, the 4-week moving average was down 6,250 to come in at 1.756 million.
Personal Income And Outlays
Personal incomes were up 0.2% overall while consumer spending rose 0.3% in December. Prices were up 0.3% overall and 0.2% in core categories. Both inflation metrics were up 1.6% on the year.
Sadly, the increased spending wasn’t really for anything exciting. According to reports, consumers spent a lot of money on prescription drugs and health care services in December.
Personal income growth was slowed by the fact that there were $36.2 billion less spent in government subsidies for farmers.
Consumer Sentiment
Consumer sentiment was up 0.7 points to 99.8, which is the best implied final reading for any month in over 2 years.
Inflation expectations were up to 2.5% over the next year, up 0.2% on the month. Meanwhile, over the next 5 years, expectations were also for 2.5% inflation, up 0.3%.
Mortgage Rates
Mortgage rates fell again last week, but before we get there, let’s dig into what the Federal Reserve said, which has an effect on mortgage rates. The Fed chose to hold short-term interest rates the same while more strongly affirming a commitment to seeing higher inflation at or above 2% over the long term. Inflation kick-starts the economy in theory because it encourages people to buy now rather than waiting for prices to increase. This stance helps mortgage rates, which have remained fairly low recently.
If you’re in the market for a mortgage, it’s a great time to lock your rate. Rates are really good.
The average rate for a 30-year-fixed mortgage with 0.7 points paid in fees at closing fell 9 basis points to 3.51%. This is down from 4.46% a year ago.
Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.7 points was down four basis points to 3%. This is fallen from 3.89% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid also fell 4 basis points to 3.24%, which is down from 3.96% last year.
Stock Market
Deaths from the new coronavirus have now exceeded the original SARS outbreak in China. There are now 11 confirmed cases in the U.S. The stock market hasn’t reacted well as the Dow Jones Industrial Average fell quite a bit on Friday.
The Dow was down 2.53% on the week and 603.41 points on the day, finishing Friday at 28,256.03. Meanwhile, the S&P 500 was down 58.14 points to 3,225.52. This has fallen 2.12% over the last 5 days. Finally, the Nasdaq finished at 9,150.94, down 148 points on Friday and 1.76% on the week.
The Week Ahead
Monday, February 3
ISM Manufacturing Index (10:00 a.m. ET) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Wednesday, February 5
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.
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
Thursday, February 6
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 4-week moving average of new claims smooths out weekly volatility.
Friday, February 7
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
There aren’t as many economic releases next week, but there are substantial reports with both employment and manufacturing data coming out. We’ll have it all covered in next week’s Market Update!
We get that this isn’t the most stimulating post when you’re feeling a little bit extra sleepy after a late Sunday night, but we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below. It being spring and all (yes, I’m committed to this), it’s time to start thinking about preparing your yard. Seriously, though. You should always be thinking about a season ahead of the weather. Here are some of our best landscaping ideas.
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