Market Update for the week of October 16, 2017 – Vol. 15, Issue 41

QUOTATION OF THE WEEK…”Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses.” –Gerald M. Loeb, stock trader, author and a founding partner of EF Hutton

INFO THAT HITS US WHERE WE LIVE… Fannie Mae’s Home Purchase Sentiment Index (HPSI) for September reports that renters are suddenly saying now is a good time to buy a home. This is a substantial increase in optimism from August when more Americans felt it was the right time to sell a home, but not buy one. The overall HPSI matched its June all-time high, after posting the highest monthly increase in the share of those who say it’s a good time to buy. And Americans are still saying now is a good time to sell, with that component of the HPSI 23% ahead of last year’s reading, and only 1% lower than the survey’s all-time high.
Ellie Mae, a provider of loan origination software and services, released its latest Millennial Tracker, which shows continued housing demand in this key segment. Their executive vp acknowledged today’s market challenges, but observed, “for those who are committed to buying a home…slight increases in competition, costs or interest rates will likely not deter them.” The report also noted that Millennials are moving away from larger metros in what may be a growing trend. An online real estate database reports 42% of all home buyers are first-timers and 28% of renters lease single-family homes, making them prime prospects for home buying.
BUSINESS TIP OF THE WEEK… When you’re in the midst of a challenge with a client or colleague, think win-win. Interact and collaborate. Figure out how to create a win-win scenario for all parties.

>> Review of Last Week
NOT MUCH TO COMPLAIN ABOUT… Stocks went higher in the first week of the third quarter earnings season, as Wall Streeters couldn’t find much to criticize in today’s economic environment. Of the companies reporting earnings, 81% delivered better-than-expected results. Add to this a spate of surprisingly good economic reports, and we saw all three major market indexes head up for the week. The Dow and the S&P 500 are now up for five straight weeks and the Nasdaq for three, closing at a record high for the 57th time this year. So far in 2017, the Dow is up 15.7%, the S&P 500 has advanced 14.0% and the Nasdaq is ahead 22.7%.
Unexpectedly good economic data featured Retail Sales blasting up 1.6% in September, its biggest monthly bump in two and a half years. And that happened even with Hurricanes Harvey and Irma slamming a good bit of consumer spending. Some economists expect sales to stay above trend in the months ahead due to pent-up demand from the hurricanes and the need to replace what was lost. Preliminary University of Michigan Consumer Sentiment for October shot up to 101.1, its highest reading in 13 years, with positive sentiment occurring in all age and income groups. Inflation came in soft, the core Consumer Price Index up just 0.1%.
The week ended with the Dow UP 0.4%, to 22872; the S&P 500 UP 0.2%, to 2553; and the Nasdaq UP 0.2%, to 6606.
Bond traders took Monday off, but four days was enough time to push Treasury prices up after a four-week losing streak. Tame inflation, something bonds love to see, certainly helped. The 30YR FNMA 4.0% bond we watch finished the week UP .12, to $105.25. Nonetheless, national average 30-year fixed mortgage rates increased for the second week in a row in Freddie Mac’s Primary Mortgage Market Survey for the week ending October 12. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… It’s reported that only 18% of sellers found their listing agent on a website, app, search engine, social media or other online source. 61% learned of their agent through referrals and face-to-face experiences.

>> This Week’s Forecast
HOME BUILDING, EXISTING HOME SALES, MID-ATLANTIC MANUFACTURING DIP A BIT… Given the hurricane clean-up going on in Houston and the hurricane damage happening in Florida in September, both Housing Starts and Building Permits are expected to be down, though not by that much. With sub-par performances out of the nation’s fourth largest city and third largest state, Existing Home Sales are also predicted to slip, but not by a lot. The Philadelphia Fed Index should show Mid-Atlantic manufacturing still growing nicely, just at a slightly slower pace.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 16 – Oct 20
Date Time (ET) Release For Consensus Prior Impact
Oct 16 08:30 NY Empire Manufacturing Index Oct 21 24.4 Moderate
Oct 17 09:15 Industrial Production Sep 0.2% -0.9% Moderate
Oct 17 09:15 Capacity Utilization Sep 76.1% 76.1% Moderate
Oct 18 08:30 Housing Starts Sep 1.160M 1.180M Moderate
Oct 18 08:30 Building Permits Sep 1.225M 1.300M Moderate
Oct 18 10:30 Crude Inventories 10/14 NA -2.8M Moderate
Oct 18 14:00 Fed’s Beige Book Oct NA NA Moderate
Oct 19 08:30 Initial Unemployment Claims 10/14 236K 243K Moderate
Oct 19 08:30 Continuing Unemployment Claims 10/07 NA 1.889M Moderate
Oct 19 08:30 Philadelphia Fed Index Oct 20 23.8 HIGH
Oct 19 10:00 Leading Economic Index (LEI) Sep 0.1% 0.4% Moderate
Oct 20 10:00 Existing Home Sales Sep 5.29M 5.35M Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Comments from Fed members have the financial market firmly expecting a rate hike in December, but no further move up in January. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 1.00%-1.25%
After FOMC meeting on: Consensus
Nov 1 1.00%-1.25%
Dec 13 1.25%-1.50%
Jan 31 1.25%-1.50%

Probability of change from current policy:
After FOMC meeting on: Consensus
Nov 1 2%
Dec 13 88%
Jan 31 89%

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