Financial Market Affects October 26, 2015

Equity investors mostly took a pause this past week from a “stocktoberfest” rally that has seen the S&P 500 Index rise by 10.3%, the Nasdaq Composite Index increase by 10.7%, and the Dow Jones Industrial Average climb 10.3% over the past four weeks.  Meanwhile, the bond market underwent a sharp two-day correction on Wednesday and Thursday following the Federal Reserve’s interest rate decision and policy statement on Wednesday.  The bond market then rebounded on Friday in reaction to disappointing economic news.

The Fed’s rate decision resulted in a Fed funds target rate of 0-0.25% as expected, but the accompanying policy statement surprised investors when it directly referenced its next meeting in December as a time when a rate hike would come into play.  The Fed also inferred the global economy is less of a concern for them than it was a couple of months ago.

The policy statement included the following: “In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and two percent inflation.”  This was a more hawkish view than was largely anticipated by investors and prompted selling in both bonds and stocks.  In reaction, the Fed Funds Futures contract showed an increase in the implied probability for a rate hike at the next FOMC meeting on December 16 to 50% from 34% prior to the statement.

There were several economic reports from the housing sector during the week.  The Commerce Department stated New Home Sales fell 11.5% to a seasonally adjusted annual rate of 468,000 units, the lowest level since November 2014.  The consensus forecast had called for a reading of 550,000 units.  Additionally, August’s New Home Sales rate was revised downward to 529,000 units from the previously reported 552,000 units.  The September decline in New Home Sales was led by a dramatic 61.8% plunge in sales in the Northeast Region.  September inventory grew to 5.8 months of supply from 4.9 months in August at the current sales pace, the highest level since July 2014.  The median new home price increased 2.7% month-over-month to $296,900 and is 13.5% higher from the same period a year ago.

A

Although this report was disappointing, September housing data on existing home sales, homebuilder confidence, and housing starts was rather strong and offers a more robust picture of the housing sector.  Plus, New Home Sales, which account for only 7.8% of the housing market, tend to be more volatile on a month-to-month basis because they are obtained from a small sample.  Daniel Silver, an economist at JPMorgan, had this to say… “The September report does little to alter our view that the housing market is continuing to recover.  We view the new home sales data as unreliable and many other more reliable housing indicators have been sending upbeat signals lately.”

Also, the S&P/Case-Shiller U.S. National Home Price Index posted a slightly higher year-over-year gain with a 4.7% annual increase in August 2015 versus a 4.6% increase in July 2015.  The 10-City Composite Index increased 4.7% in the year to August compared to 4.5% in the prior month.  The 20-City Composite’s year-over-year gain was 5.1% versus 4.9% in the year to July.

Furthermore, the National Association of Realtors (NAR) Pending Home Sales Index fell 2.3% in September to a seasonally adjusted reading of 106.8, the second-lowest level of the year.  Economists had predicted a +0.6% rise in September sales.  The NAR ascribed the latest decline to a shortage of home listings having limited buyer options, particularly at the lower end of the market.  Also, stock market volatility in August, may have unsettled prospective buyers.

In mortgage news, the Mortgage Bankers Association released their latest Mortgage Application Data for the week ending October 24 showing the overall Index fell 3.5%.  The Refinance Index dropped 4.0% from the prior week, while the seasonally adjusted Purchase Index decreased by 3.0% from a week earlier.  Overall, the refinance portion of mortgage activity was unchanged at 59.5% of total applications.  The adjustable-rate mortgage segment of activity decreased to 6.6% of total applications from 6.9% the prior week.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance rose from 3.95% to 3.98%.

For the week, the FNMA 3.5% coupon bond lost 26.6 basis points to end at $104.11 while the 10-year Treasury yield increased 6.3 basis points to end at 2.15%.  Stocks ended the week with the NASDAQ Composite gaining 21.89 points to close at 5,053.75.  The Dow Jones Industrial Average increased 16.84 points to end at 17,663.54, and the S&P 500 added 4.21 points to close at 2,079.36.

Year to date, and exclusive of any dividends, the NASDAQ Composite has gained 6.29%, the Dow Jones Industrial Average has declined 0.90%, and the S&P 500 has risen 0.98%.  This past week, the national average 30-year mortgage rate increased to 3.90% from 3.83% while the 15-year mortgage rate increased to 3.19% from 3.11%.  The 5/1 ARM mortgage rate increased to 2.94% from 2.91%.  FHA 30-year rates increased to 3.75% from 3.50% while Jumbo 30-year rates increased to 3.71% from 3.62%.

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.5% coupon bond ($104.11, -26.6 bp) traded within a wider 91 basis point range between a weekly intraday high of 104.69 and a weekly intraday low of $103.78 before closing at $104.11 on Friday.  Friday, the bond traded down to within 8 basis points of the low on September 25 ($103.70) before bouncing higher on weak economic news.  The upward reversal resulted in a challenge of a triple layer of technical resistance formed from the 50-day moving average at $104.07, the 200-day moving average at $104.12, and the 23.6% Fibonacci retracement level at $104.15.  If the bond can break above this layer of resistance in the coming week, we could see mortgage rates improve slightly.

Chart:  FNMA 30-Year 3.5% Coupon Bond

B

Economic Calendar – for the Week of November 2

The economic calendar features several reports focusing on the labor sector highlighted by the Employment Situation Summary for October (Jobs Report) on Friday.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

C

Road Signs – Vaccines back in the headlines – here’s what the experts say

By Jessie Schanzle, Editor, The Conversation

The Conversation is funded by the Gordon and Betty Moore Foundation, Howard Hughes Medical Institute, the Knight Foundation, Robert Wood Johnson Foundation, Alfred P Sloan Foundation and William and Flora Hewlett Foundation.

September 16th’s Republican debate put vaccines back in the headlines, when Ben Carson, a former neurosurgeon, was asked to comment on Donald Trump’s statements linking vaccinations to autism.  Carson said:

We have extremely well-documented proof that there is no autism associated with vaccinations, but it is true that we’re giving way too many in way too short a time and a lot of pediatricians recognize that.

This has sparked a flurry of reminders from physicians, scientists and others that vaccines are safe and that vaccines do not cause autism.

This is a discussion that we have covered again and again and again at The Conversation.

Yet these messages don’t seem to have counteracted misinformation about vaccines. That’s because these explanations often repeat the very falsehoods they are trying to correct.  As Norbert Schwarz and Eryn Newman from the University of Southern California write:

Media reports that intend to correct false information can have the unfortunate effect of increasing its acceptance.  Using anecdotes and images makes false information easier to imagine – and by highlighting disagreement, they distort the amount of consensus that actually exists.

A better strategy, they say, is to stick to the facts.

Kristin S Hendrix, a professor of pediatrics at the Indiana University School of Medicine, examined the research on parent-provider conversation about vaccines.  She writes:

What is clear from existing research is that respectful, tailored communications and recommendations to immunize coming directly from the health-care provider are associated with increased vaccination uptake.

Before the measles vaccine was introduced in the US in the 1960s, we thought of measles as a “mild” illness, even though it killed 400-500 Americans a year.  Today, suggesting that measles is benign is controversial.  And that is because vaccines change how we think about the disease they prevent.  As Emory historian Elena Conis writes:

Vaccines shine a spotlight on their target infections and, in time, those infections – no matter how “common” or relatively unimportant they may have seemed before – become known for their rare and serious complications and defined by the urgency of their prevention.

Marcel Salathé, now a professor at École polytechnique fédérale de Lausanne, points out everyone who can be vaccinated, should be vaccinated, to help protect those who are too young or too ill to receive the vaccine.  Tony Yang, a professor of health administration at George Mason University, looked at the impact vaccine exemption polices have on outbreaks of vaccine-preventable diseases.  And Michael Mina, an MD/PhD candidate at Emory, explained how the introduction of the measles vaccine in Europe prevented deaths from other diseases.

Speaking of other diseases, just over a year ago, news that a handful of people in the United States had contracted Ebola was dominating the headlines.  William Moss, an epidemiologist at Johns Hopkins, pointed out that Americans should worry less about Ebola and more about the measles.

Financial Market Affects February 2, 2015

After getting off to a disappointing start to the New Year in January, equities surged higher during the first week of February while bond prices tumbled and yields rose.  The largest market moves took place last Tuesday and Friday.

Tuesday, equity markets were supported by news that progress was being made between Greece and its lenders in restructuring Greece’s debt.  The stock market was also boosted by a decline in the U.S. dollar and surging crude oil prices that rose 6% higher to over $52 a barrel.  With oil back above the psychologically important $50 per barrel mark, energy sector stocks led the broader stock market higher triggering significant selling in the bond market.

On Friday, a strong January Employment Situation Summary (Jobs Report) sent bond prices cascading lower and yields higher.  The Labor Department reported the addition of 257,000 jobs in January, marking the 12th consecutive month that Non-farm Payrolls had exceeded the 200,000 mark, a level normally associated with a sustainable decline in the unemployment rate.  The consensus forecast had been for an increase of 235,000 new positions.

Furthermore, November and December’s jobs numbers were revised significantly higher with November Nonfarm Payrolls revised to 423,000 from an initially reported 353,000 while December Nonfarm Payrolls were revised to 329,000 from 252,000 while Nonfarm Private Payrolls were revised to 320,000 from 240,000.  The Unemployment Rate edged up from 5.6% to 5.7%, in part because the labor force participation rate increased by 0.2% to 62.9%.  This is viewed as a positive development as it suggests more people are now actively looking for work.

Also, there was a significant 0.5% jump in Average Hourly Earnings, and this exerted a negative influence on the bond market even though 0.2% of this gain in earnings can be attributed to an increase in the minimum wage in 20 states that went into effect on January 1 of this year.  The consensus forecast called for a 0.3% gain in Earnings following December’s deflationary number of -0.2% that had sparked a sharp drop in bond yields.  The prior worries about wage disinflation were unwound in the bond market on Friday, plus the robust labor report provided the Federal Reserve with a stronger case for raising interest rates “sooner rather than later” and this weighed heavily on the bond market.

For the week, the FNMA 3.0% coupon bond lost 132.8 basis points to end at $102.14 while the 10-year Treasury yield increased 27.8 basis points to reach 1.96%.  Stocks ended with the NASDAQ Composite gaining 109.16 points, the Dow Jones Industrial Average adding 659.34 points, and the S&P 500 increasing 60.48 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 0.18%, Dow Jones Industrial Average has added 0.01%, and the S&P 500 has lost 0.17%.  The national average 30-year mortgage rate rose from 3.55% to 3.72% while the 15-year mortgage rate increased to 3.02% from 2.95%.  The 5/1 ARM mortgage fell to 3.12% from 3.13%.  FHA 30-year rates held steady at 3.25% and Jumbo 30-year rates increased to 3.75% from 3.58%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($102.14) lost 132.8 basis points during the past week while the stock market recorded significant gains.  The technical picture for bonds looked favorable a week ago, but the bond’s sharp decline last Tuesday generated a new sell signal from a negative stochastic crossover and it was all “downhill” from there with stronger economic news.  The bond tried to stabilize on Wednesday and Thursday, but was hit with a major negative catalyst in the form of a blockbuster employment report on Friday.  The favorable jobs news sent the bond’s price in a free-fall below support provided by the 25-day moving average.  This level now becomes nearest overhead resistance.  The next primary support level is now the 50-day moving average at $101.74.  The slow stochastic oscillator is no longer “overbought,” but there is considerable room to the downside before it becomes “oversold” so it is possible we could see further bond price erosion this coming week with slightly higher interest rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

Economic Calendar – for the Week of February 9

This week the economic calendar highlights weekly Crude Oil Inventories on Wednesday; Initial Jobless Claims and Retail Sales on Thursday; and the University of Michigan’s Consumer Sentiment Index on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

Road Signs – Color, Color On The Wall, Which Is Fairest Of Them All This 2015?

By Desare A Kohn-Lask

Every year, there is or there are certain colors which stand out from the rest of the paint palette. Before 2014 comes to a close, professionals whose works are associated with the exterior and interior beauty of the house gave their predictions as to which paint color would be the fairest this 2015.  Here are some colors worth-mentioning in this short list.

Marsala

The Pantone Color Institute has elected the color Marsala as the color of 2015.  It is known as Pantone 18-1438 by the codes.  According to Leatrice Eiseman, the institute’s executive director, the color enriches our mind, body, and soul.  It is a subtly seductive shade, one that draws us into its embracing warmth.

The color, due to its versatility fits into many applications including that of beautifying a house.  The drama it brings because of its richness and warmth.  When used in interior spaces of the house, it can very well be paired off with other colors especially those that are neutral.  It can go pretty good with amber and umber and even golden yellows and teals.  Imagine the very rich designs in terms of wall colorizing that this color of the year can bring into your house.

Taking its cue from the wines, Marsala is also very fit for use on particular home spaces like the kitchen and dining room.  It is seen ideal in tabletops as well as great choice when it comes to the color of home appliances which shall fill the functionality of the gastro hubs of the house.

Proving its diversity, it is not only fit for splashing the walls.  The color is also an ideal choice when it comes to imparting elegance into home accessories like floor rugs, carpets, and other upholstered parts of the house.  It can even bring class to the living room and entertainment rooms.

As 2015 opens up, we can expect paint makers as well as makers of appliances and home accessories to capitalize on the elegant warmth that Marsala can bring as the color of the year.  As with the previous colors of the year, home owners can also expect that new trends in home design and renovation are to spring up from the color.

If you like to welcome 2015 with warmth, beauty, and elegance – you can opt to breathe new life into your house using the seductive color known as Marsala.  Give in to its temptation!

Click here to see the color.

Desare Kohn-Laski is a proud realtor and experienced Military Relocation Professional in Florida.  She is a real estate broker who is knowledgeable and familiar of the South Florida real estate market.  Her areas of services include Broward County, Palm Beach County & Miami-Dade County.  For more information, hop on to skyelouisrealty.

Financial Market Affects January 12, 2015

Several disruptions in global financial markets sent equity prices lower and Treasury bond prices higher resulting in lower yields.  Stocks suffered their third week of losses as investors were concerned about how corporate earnings would be affected by falling energy prices, the rising U.S. dollar, and other economic factors.

Longer-maturity U.S. Treasuries rallied strongly during a week punctuated by increasing fears over global deflation, sending the yield on the 30-year “long bond” to an all-time low. Meanwhile, the benchmark 10-year Treasury note’s yield touched its lowest level since May 2013 and finished the week at 1.83%.

Several reports during the week left substantial impacts on the financial markets.  On Wednesday, the December Retail Sales report surprisingly showed a decline of -0.9% when analysts were looking for a slight increase of 0.1%.  The sharp decline in Retail Sales was a direct result of the poor income growth indicated in the December employment report that showed a contraction in the average hourly wage.  Without any income growth, the only way for Retail Sales to show improvement is for consumers to tap into their personal savings, and this is something most consumers would prefer not to do.

On Thursday, a shocking foreign exchange policy change from the central bank of Switzerland stunned global currency markets and added to the demand for safe-haven assets, including U.S. Treasuries.  The Swiss National Bank abandoned a cap on the price of the Swiss franc in terms of euros that it had maintained by selling francs, triggering a sudden appreciation of almost 30% of the Swiss franc against the euro.  Several retail foreign exchange brokerages and their clients were totally blindsided by the unexpected decision by the Swiss National Bank and lost hundreds of millions of dollars.

On Friday, the Consumer Price Index (CPI), driven down by lower energy prices, posted its largest decline in six years in December.  The CPI fell 0.4%, the most since December 2008.  Analysts said it will increase chances the Federal Reserve will hold off raising interest rates until late this year.  The core CPI, which strips out food and energy costs, was unchanged, just the second time since 2010 that it didn’t increase.  Year-over-year, core CPI is up only 1.6% and down from a 1.7% increase in November.  Usually, the CPI runs about 0.5 percentage points below the PCE price index.  Therefore, current inflation trends are about 1.0% below the Fed’s implied CPI target of roughly 2.5% and are downward trending.  As long as this downward trend remains, the Fed will be hard pressed to raise interest rates.

For the week, the FNMA 3.5% coupon bond lost 14.1 basis points to end at $105.02 while the 10-year Treasury yield fell 11.9 basis points to reach 1.83%.  Stocks ended with the NASDAQ Composite losing 69.69 points, the Dow Jones Industrial Average dropping 225.80 points, and the S&P 500 falling 25.39 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has dropped 2.19%, Dow Jones Industrial Average has lost 1.78%, and the S&P 500 has given up 1.96%.  The national average 30-year mortgage rate fell from 3.71% to 3.63% while the 15-year mortgage rate dropped to 3.00% from 3.04%.  The 5/1 ARM mortgage fell to 3.22% from 3.24%.  FHA 30-year rates held steady at 3.25% and Jumbo 30-year rates fell to 3.60% from 3.64%.

Mortgage Rate Forecast with Chart

The FNMA 3.5% coupon bond ($105.02) lost 14.1 basis points during a week when the mortgage bond market showed an increase in volatility.  Wednesday through Friday there were considerably larger intraday trading ranges than usual where prices soared above overhead resistance levels located at $105.33 and $105.48 only to end up below them by week’s end.

On Friday for instance, the bond opened nine basis points lower at $105.45 and traded up to a high of $105.61 before plunging to a low of $104.89 to complete an expanded intraday trading range of 72 basis points.  The day’s negative candlestick pushed price well below what is now a dual layer of strong overhead resistance at $105.48 and $105.33.  Support is now defined by the 25-day moving average at $104.47.

Furthermore, a new sell signal was generated from a negative stochastic crossover as the %K line has crossed below the %D line in the slow stochastic oscillator.  Despite Friday’s price drop and negative crossover the bond remains significantly “overbought” and could be susceptible to further price weakness in the coming week.

Stocks rallied on Friday snapping a five session losing streak.  If stocks continue to rebound this week as fourth quarter corporate earnings season swings into high gear, it could trigger some profit taking in the bond market and send yields a little higher.

Chart:  FNMA 30-Year 3.5% Coupon Bond

Economic Calendar – for the Week of January 19

The economic calendar is heavily focused on the housing sector and features the NHAB Housing Market Index on Tuesday; the weekly MBA Mortgage Index, Housing Starts, and Building Permits on Wednesday; weekly Initial and Continuing Jobless Claims, the FHFA Housing Price Index, and crude oil inventories on Thursday; and Existing Home Sales and the Index of Leading Economic Indicators on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

Road Signs – If You Are Trying To Lose Weight, Avoid These Three Foods

By Jon Allo

The secret of how to lose weight safely and effectively it is to know what you are eating is delivering all of the nutritional goodness that your body needs.  Though it may sound simple to just remove three kinds of foods from your diet, these changes alone could help you cut back on a lot of calorie consumption.   There is a fundamental blueprint for how to lose weight.  You have to eat the proper foods, not eat too much, and let your physical actions burn up the food it’s been fed. But it’s not always that simple when you’re trying to lose weight.

You can exercise as hard as you want, but if you are replacing those calories that you’ve burned with unhealthy foods, chemicals and extra fats, it is very unlikely that you will reach the weight loss goals that you want.  If you’re trying to lose weight by not eating, it is not the way to lose weight successfully. If you try starving yourself, you’ll only harm yourself in the long run.  You have to eat and make the right food choices.  Here are three foods types to avoid if you’re trying to lose weight.

Foods From a Box Can or Carton

When you’re trying to lose weight, stay away from processed foods that come in a box, can, bag or carton.  They are often modified to extend shelf life leading to little or nutritional value and often the level of fats, sodium and sugars in these foods are extremely high.  Just take a look at the back of the box.  How many of the ingredients can you actually read?  Aim to eat foods that are as natural as possible, as they allow your body to get more nutrients.

High Calorie Drinks

Drinking excessive amounts of carbonated drinks is one of the biggest reasons for gaining weight today.  The popular colas all contain large amounts of both sugar and calories.  Watch out too for high-calorie sports drinks or fruit juices, which are often packed with sugar.  Beware of drinks from the coffee shop.  Drinks like lattes, americanos, cappuccinos and frappuchinos are extremely high calorie drinks.  The best drink you can have when you’re trying to lose weight is water.  It has no preservatives, no sodium, and no calories and helps to fill you up so you won’t feel too much of an urge to eat tempting foods.

Processed Meats

Processed meats are generally made up of different body parts that couldn’t be sold separately and all mixed with significant amounts of fat, preservatives, chemicals and salt.  You can check online to see what goes into meats such as pastrami, salami, hot dogs and sausages.  Hamburgers and minced meats can also count as processed meat if they have been preserved with salt or chemical additives.  If you stick to lean, whole meats, you’ll eat fewer calories and you’ll be eating far healthier overall.

ABOUT THE AUTHOR

Do you want to learn more ways to lose weight and get fit?  Are you confused about healthy eating?  Do you want to know the best workout techniques to get the results you want?  Get more nutritional information, the best exercise programs, fitness motivation and a FREE eBook with over 100 tips for losing belly fat here.