HOT MONTH… In some parts of the country, this February was one of the coldest on record, but on Wall Street, things were hot, with all three major stock indexes up more than 5% for the month. The S&P 500’s 5.5% February gain was its biggest monthly increase in more than four years. Weekly performances were cooler, with the Dow essentially flat, the tech-heavy Nasdaq up a little, the S&P 500 off a little. These results mimicked the key news items. There were upbeat developments in Ukraine, Russia, and China, as well as progress in Europe, including Greece. Over here, a 0.7% drop in the Consumer Price Index (CPI) worried some, but it was pretty much all due to oil prices.
The headline numbers were down for New and Existing Home Sales, but up for Pending Home Sales. Durable Goods Orders went up 2.8% in January, while the Q4 GDP–2nd Estimate was revised down to a tepid 2.2%. The Chicago PMI reported the largest contraction in Midwestern manufacturing since 2009, yet Michigan Consumer Sentiment reached a nice 95.4 reading.Unfortunately, Weekly Initial Unemployment Claims hit 313,000, up by 31,000 and scoring their biggest percent gain since 2013. Continuing Unemployment Claims dipped a tad, but are 3.5% above the last quarter, at 2.401 million. The 4-week average grew by 2,000, to 2.39 million.
The week ended with the Dow down less than 0.1%, to 18133; the S&P 500 down 0.3%, to 2105; and the Nasdaq UP 0.2%, to 4964.
There was enough weaker than expected economic data to keep investors interested in bonds, nudging some prices up. The 30YR FNMA 4.0% bond we watch finished the week UP .12, to $106.30.For the week ending February 26, Freddie Mac’s Primary Mortgage Market Survey reported national average fixed mortgage rates creeping ahead for the third week in a row. Happily, rates still remain near May 2013 lows.Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Last week, New York Fed President William Dudley said that the risk of raising rates early outweighed the risk of raising them too late.>>This Week’s Forecast
CONSUMER SPENDING OFF, PRICES UP, SOME MORE JOBS… Among the interesting reads this week will be Personal Spending, expected down a tick in January, and Core PCE Prices, forecast to show inflation up, but still OK. Friday’s February jobs report is predicted to reveal a moderate increase in Nonfarm Payrolls, above 200,000 but well below the 300,000 level economists would like to see for a strong recovery. The Unemployment Rate, however, should dip to 5.6%.
>> 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.
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Fed Chair Janet Yellen told the Senate Banking Committee last Tuesday it’s “unlikely that economic conditions will warrant an increase in…the Federal Funds Rate for at least the next couple of FOMC meetings.” Note: In the lower chart, a 3% probability of change is a 97% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
Courtesy Of Troy Lepisto, lender at First Mortgage in Santa Fe, 505-670-6399