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Week In Review – August 10, 2018

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Week In Review

Volume 24, Number 28

Reginald J. Smith, Community Development Manager – Bank of Kansas CityReginald J. Smith

Economic Highlights for Week Ending August 10, 2018

 

MONDAY, August 6th

The CoreLogic Home Price Index rose 6.8% year over year in June, a slight increase from May’s 6.7% growth rate, which was revised down from 7.1% in this report.  Monthly growth was 0.7%, the slowest pace since January.

Amid a dearth of economic data, strong second-quarter company earnings growth overshadowed escalating trade tensions between China and U.S., pushing the Dow up 0.16% to a close of 25,502.18, the S&P 500 index up 0.35% to 2,850.40, and the Nasdaq up 0.61% to 7,859.68.  Interest rates edged slightly lower from Friday’s levels, with the 2-year at 2.65% and the 10-year at 2.94%, pulled down by an employment report that was less robust than expected.  Oil prices rose 39 cents to $68.9 per barrel, boosted by supply concerns following Friday’s report of output cuts by Saudi Arabia and by today’s announcement of the re-imposition of the first round of Iran sanctions. Gold prices dropped $7.6 dollars to $1215.60.

TUESDAY, August 7th

Consumer credit rose by $10.2 billion in June, underwhelming expectations for a $16 billion increase.  The gain was led solely by increases in non-revolving balances such as vehicle financing and student loans.  Consumers held back from adding to their credit-card debt and even paid off some of it following a spending spree in the previous month.  Revolving credit, which includes credit cards and which posted the biggest increase since November in the previous month, fell $0.2 billion in June.  The decline in revolving credit suggests the consumer regained the prudent spending habits characteristic of most the months in the first half of the year.

UFSC Week In Review

WEDNESDAY, August 8th

The MBA mortgage applications index fell 3.0% for the week ending August 3.  The purchase index fell 2.0% on the week as the refinance index tumbled 4.5%.  Mortgage rates were steady, with the average interest rate for 30-year fixed rate conforming mortgages ($453,100 or less) remaining unchanged from the prior week at 4.84%.  Higher interest rates are taking their toll on mortgage activity and the 2% year-on-year decline in purchase applications does not bode well for a housing market already showing little life.

Single-family home prices continue to make steady gains as tight inventory levels push home values higher even amid moderating demand.  The national median existing single-family home price increased 5.3% year-over-year in the second quarter.  The good news is that this is slightly slower than the 5.7% increase in the first quarter, thanks to inventory at last starting to increase from its previous rock-bottom level.  The proportion of metro areas showing year-over-year price gains was 161 out of 178, or 90.4%.

THURSDAY, August 9th

Wholesale inflation pressures were surprisingly subdued in July, with producer prices for final demand remaining unchanged after advancing 0.3% in June and 0.5% in May.  A 0.5% drop in energy prices weighed down the headline PPI.  Producer prices less food & energy moved up just 0.1%, also below expectations.

Treasuries received a lift from the more benign than expected PPI report, with the 10-year yield closing down about 4 bps to 2.924%.  Stocks were rangebound and ended slightly lower, with the Dow closing down 0.3% at 25,509, the S&P 500 down 0.1% at 2,854, and the Nasdaq ending roughly unchanged at 7,892.  Crude oil extended yesterday’s 3.3% plunge by another 0.4% to $66.70 per barrel.

FRIDAY, August 10th

The consumer price index rose 0.2% in July as energy prices dropped 0.5% and food prices increased just 0.1%.  Excluding food and energy prices from the index, the core CPI also rose 0.2% on the month.  Over the past year headline consumer inflation was up 2.9% and core consumer inflation rose 2.4%.  Today’s data on consumer prices shows core inflation reaching the highest level in nearly 10 years which could lead to more hawkishness at the Fed.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,313.14
25,462.58
-149.44 or -0.59%


NASDAQ
7,839.11
7,812.02
+27.09 or +0.35%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
5.00%
4.50%
4.25%


Fed Discount
2.50%
2.00%
1.75%


Fed Funds
1.90%
1.42%
1.16%


11th District COF
0.885%
0.746%
0.648%


10-Year Note
2.82%
2.24%
2.27%


30-Year Treasury Bond
3.03%
3.10%
2.82%


30 -Yr Fixed (FHLMC)
4.59%
4.05%
3.90%


15 -Yr Fixed (FHLMC)
4.05%
3.77%
3.18%

6-Mo Libor (FNMA)
2.50125%
1.83707%
1.44767%

 

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

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