26. March 2016 Economic Update 0
Stocks slightly lower this week – Stocks pulled back after five members of The Federal Reserve’s Open Market Committee suggested that the next rate hike could come as early as the April meeting. This was a change to the statements made just a month ago when the economy seemed like it was faltering. Over the last six weeks stocks have rebounded. The 2015 4th quarter U.S GDP has been revised upward twice, auto sales were a record high, and consumer spending was higher than expected. Job gains were especially strong in February after a disappointing January. The general mood of economists has shifted from the economy possibly slowing to the economy is still expanding over the past month, as has The Fed’s outlook, apparently. Speculation of a rate hike coming strengthened the dollar, which has dropped from multi year highs in recent weeks. This is not especially good for manufacturing as a strong dollar makes U.S. goods more expensive. Oil prices retreated a little this week after rising 40% from a 13 year low on February 11 when U.S crude oil hit $26 a barrel. Oil was over $40 a barrel early in the week before dropping back to end the week at $39.46. Low oil prices have hurt energy companies, and energy producing areas where companies have cutback on production and laid off workers. After six weeks of gains stocks retreated a little this week.
The Dow Jones Industrial Average closed the week at 17,515.33, down from 17,602.30 last week. The S&P 500 closed the week at 2,035.94, down from 2,049.58 last week. The NASDAQ closed Friday at 4,773.50, down from 4,795.65 last week.
Bond yields almost unchanged for the week – The 10 year U.S. Treasury bond closed Friday yielding 1.91%, slightly higher than 1.88% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.67%, almost unchanged from 2.68% last week. Mortgage rates follow bond yields so we watch bonds carefully.
Mortgage rates –The Freddie Mac Primary Mortgage Survey released on March 24, 2016 showed that average mortgage rates from lenders surveyed for the most popular products were as follows: The 30 year fixed average rate was 3.71%. The 15 year fixed average rate was 2.96% The 5/1 ARM average was was 2.89%.
California existing home sales show mixed results in February – The California Association of Realtors reported that the number of California home sales in February was up 2.6% from January, and 6.4% above last February’s levels. The Los Angeles region showed almost identical increases as the state as a whole. Tempering the report was home prices. The statewide median price fell 4.7% in February from January and year over year the median price was up just 3.8% from last February. Inventory levels which hit record lows of a 3 month supply just a few months ago have increased. The unsold inventory index rose to a 4.6 month supply in February as more homes have hit the market. The unsold inventory index was at a 4.9 month supply last February before edging down as sales increased in the spring.
U.S. Existing home sales fall sharply in February – The National Association of Realtors reported that month over month total existing home sales dropped 7.1% in February. On a positive, home sales were 2.2% higher than last February’s levels. The drop was most significant in the Northeast and Midwest which weighed down the national numbers. Weather was thought to have played a part as a massive snow storm in the east may have slowed sales. Low inventory levels, were also to blame according to the report.
New home sales jump in February – The Commerce Department reported that the number of sales of new homes surged 38.5% in the Western United States. All other regions declined and the country as a whole showed new home sales up 2% in February. Obviously, strong sales here in the west pulled that number positive.