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Week In Review – January 5, 2018

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Week In Review

Volume 24, Number 1

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

UFSC Week In Review

Economic Highlights for the Week Ending January 5, 2018

 

MONDAY, January 1st

NEW YEARS DAY
All Markets Closed

 

TUESDAY, January 2nd

After a very bullish 2017, stocks opened 2018 on a strong note. The Dow rose 0.4 percent to 24,824 while the Nasdaq surged 1.50 percent and is over 7,000 for the first time, at 7,006. Money eased out of bonds, raising corresponding yields as the 10-year Treasury yield rose 5 basis points to 2.46 percent. Lower yields often lower demand for the dollar which fell 0.5 percent on the dollar index to 91.81. Oil held steady over $60 while gold moved further above $1,300 to $1,320.

The CoreLogic Home Price Index rose 7% year over year in November. The index previously increased by this amount or more in the spring of 2014. The monthly increase was 1%, the biggest month-over-month increase in 19 months.

 

WEDNESDAY, January 3rd

The MBA mortgage applications index rose 0.7% for the week ending December 29. The gain was led by a 1.4% gain in the refinance index as the purchase index slipped 0.1% on the week. Contract mortgage rates were little changed last week with the 30-year fixed for conforming mortgages unchanged from the prior week at 4.25%.

Motor vehicle sales rose to an annualized pace of 17.9 million units in December, up from an annual pace of 17.5 million units in November. Outside of October and September, which were driven by hurricane-replacement demand, December’s results are among the very best of the last two years. Sales results point to strength for the motor vehicle component of the retail sales report and are a plus for fourth-quarter consumer spending. For all of 2017, new-vehicle sales totaled 17.3 million units.

Total construction spending in November increased 0.8% from a month earlier, outperforming the consensus forecast of a 0.5% increase. Residential construction powered the spending increase for the second consecutive month, rising 1.1% from the prior month. Private construction spending rose 1% and is 2.6% higher than last November. Public construction spending registered a modest 0.2% increase. October’s large 1.4% increase was revised lower to 0.9%.

 

THURSDAY, January 4th

Jobless claims rose 3k to 250k for the week ending December 30. Initial claims remain remarkably steady and low even amid usual volatility around the holidays. The four-week moving average also rose modestly gaining 3500 from the previous week to 241,750, still low and indicative of labor market strength.

Service sector activity softened a bit in December but remains in good condition. The ISM non-manufacturing index fell to 55.9 last month from 57.4 in November. The level of the index shows continued expansion in service sector activity, though at a slightly slower pace. Despite falling in December, the index represents continued growth in the nonmanufacturing segment, and fundamentals remain supportive overall for non-manufacturing, which accounts for 88% of GDP.

 

FRIDAY, January 5th

The economy added 148,000 new payrolls in December, below expectations. Still, when averaged out, job growth was over 200k a month in the fourth quarter indicating high employment levels. Payroll gains last month were led by construction, manufacturing jobs while retail trade jobs declined. Details in this data series showed some wage pressures building with average hourly earnings up 0.3% on the month and nearly 2.6% on the year. Separately, the unemployment rate was unchanged at 4.1% as was the labor participation rate of 62.7%. The data indicates a tight labor market with some scarcity of skilled labor, modest wage growth which could possibly be holding back further economic expansion.

Stocks were very solid, opening the year with a 2.3 percent weekly gain for the Dow which is now easily over 25,000 at 25,295. Oil also had a strong week, rising 2.4 percent to $61.61, as did gold, up 1.2 percent to $1,320. Both short- and long-term yields in the Treasury market rose with the 10-year ending at 2.48%.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
25,295.87
24,719.22
+576.65 or +2.33%


NASDAQ
7,136.56
6,903.39
+233.17 or +3.38%


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
4.50%
4.25%
3.75%


Fed Discount
2.00%
1.75%
1.25%


Fed Funds
1.37%
1.12%
0.60%


11th District COF
0.746%
0.648%
0.603%


10-Year Note
2.48%
2.36%
2.43%


30-Year Treasury Bond
2.81%
2.89%
3.01%


30 -Yr Fixed (FHLMC)
3.95%
3.96%
4.20%


15 -Yr Fixed (FHLMC)
3.38%
3.22%
3.44%

6-Mo Libor (FNMA)
1.83707%
1.44767%
1.31767%

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