Financial Market Affects November 9, 2015

There was continuing turmoil in the financial markets this past week generated from the better than forecast employment numbers in the October Employment Situation Summary released on November 6.  There is growing sentiment that the Federal Reserve will act to raise interest rates on December 16 for the first time in a decade due to the better employment data.

There is little doubt now that the Fed will pull the trigger on a 0.25% rate hike unless the next jobs report, due out on December 4, is a complete downside disaster.  The 30-day Fed Funds Futures are currently showing a 70% probability for a December rate hike, a 74% probability for a January rate hike, and a 33.1% probability for a second rate hike in March.

This past Friday, U.S. Treasuries and mortgage bonds rallied on weak U.S. economic data, lower crude oil prices, and a selloff in the stock market.  Retail Sales, Core Retail Sales, the Producer Price Index, and the Core Producer Price Index all missed consensus forecasts.

The Commerce Department reported Retail Sales rising just 0.1% during October after being unchanged in September.  The consensus forecast had called for Retail Sales increasing 0.3% after a previously reported 0.1% increase in September.  A surprising 0.5% decline in automobile sales led to the lower retail sales figure, suggesting there could be a slowdown in consumer spending that could reduce expectations for a stronger advance in fourth quarter economic growth.  However, the Retail Sales data is unlikely to alter expectations that the Federal Reserve will raise interest rates in December following October’s strong employment report.

Additionally, the Labor Department reported the Producer Price Index (PPI), a measure of wholesale costs, fell -0.4% in October when the consensus forecast had been for a +0.1% increase.  The PPI has now been either flat or lower for four consecutive months leading to a record 1.6% decline over the past year.

When excluding the volatile categories of food, energy and trade, the Core PPI declined by a smaller -0.3% but well below the consensus forecast of +0.1%.  It seems inflationary pressure at the wholesale level within the U.S. economy is difficult to find, but the Fed sounds ready to raise interest rates anyway as early as December 16 because they expect inflation to accelerate when the effects of cheaper gas prices and a strong dollar decline.

In housing, the Mortgage Bankers Association released their latest Mortgage Application Data for the week ending November 6 showing the overall Index fell 1.3%.  The Refinance Index dropped 2.0% from the prior week, while the seasonally adjusted Purchase Index increased by 0.1% from a week earlier.  Overall, the refinance portion of mortgage activity increased to 59.8% of total applications from 59.7%.  The adjustable-rate mortgage segment of activity decreased to 6.6% of total applications from 6.7% the prior week.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance rose from 4.01% to 4.12%, its highest level since August 2015.

For the week, the FNMA 3.5% coupon bond lost 10.9 basis points to end at $103.19 while the 10-year Treasury yield decreased 5.1 basis points to end at 2.27%.  Stocks ended the week with the NASDAQ Composite losing 219.24 points to close at 4,927.88.  The Dow Jones Industrial Average fell 665.09 points to end at 17,245.24, and the S&P 500 dropped 76.16 points to close at 2,023.04.

Year to date, and exclusive of any dividends, the NASDAQ Composite has declined 3.89%, the Dow Jones Industrial Average has lost 3.35%, and the S&P 500 has fallen 1.77%.  This past week, the national average 30-year mortgage rate decreased to 4.03% from 4.04% while the 15-year mortgage rate decreased to 3.24% from 3.27%.  The 5/1 ARM mortgage rate increased to 3.00% from 2.95%.  FHA 30-year rates remained unchanged at 3.75% while Jumbo 30-year rates decreased to 3.84% from 3.85%.

Mortgage Rate Forecast with Chart

For the week, the FNMA 30-year 3.5% coupon bond ($103.19, -10.9 bp) traded within a narrower 49 basis point range between a weekly intraday high of 103.30 and a weekly intraday low of $102.81 before closing at $103.19 on Friday.

The bond made a solid move higher on Friday, confirming a couple of trend reversal signals appearing last Tuesday and Thursday.  Friday’s trading action carried the bond higher for a challenge of technical resistance located at the 38.2% Fibonacci retracement level at $103.16.

The slow stochastic oscillator is continuing to gain upward momentum while still being “oversold” so there is considerable upside potential for a continuing move higher, especially if the stock market continues to falter between now and the Thanksgiving holiday as a number of market analysts are predicting.  As a result, we should see a slight improvement in mortgage rates this coming week.

Chart:  FNMA 30-Year 3.5% Coupon Bond


Economic Calendar – for the Week of November 16

The economic calendar features a couple of manufacturing reports, the weekly Initial Jobless Claims report, and the Consumer Price Index in addition to the Fed’s FOMC Minutes from their October 28 meeting.  Economic reports having the greatest potential impact on the financial markets are highlighted in bold.



Road Signs – What Does A Perfect Credit Score Look Like? – Habits of High Credit Score Consumers Analyzed

By Nikitas Tsoukalis

The average credit score in the US is around 692 points.  There are many people with bad credit, whose scores can go as low as 350 points.  And then, on the other end, are those few with perfect and near perfect credit, who have scores from the high 700s to 800 or more.  One half of one percent of consumers have a perfect 850.  What distinguishes these few from the pack?

They Don’t Miss Payments. Ever.

Missing payments is the one thing that will do more damage to your credit than any other action.  People who attain and keep high scores do so, in part, by making sure that their payment history is flawless.

To keep your credit score climbing, make sure that every bill is paid on time every month.  Know how much you earn and where it goes so that a bill never surprises you.  Keep an emergency fund so that, if a bill is larger than expected, you have the funds to keep payments up to date.

They Exercise Restraint

Have you ever looked at the latest shiny electronic, a new dress, or any other thing you wanted and thought that you could just put it on a charge card and pay it off later?  This is the sort of thinking that, if done too often, can kill your credit score.  People with high credit scores never charge anything they can’t pay off in full.  They view credit as a tool they use, rather than a crutch.  On average, they only use 7% of their revolving credit.

They Have a Mix of Credit Types

Creditors want to see that you can be responsible with both revolving credit and installment loans. By having a mix that includes car loans, credit cards and a mortgage, they maximize their scores.

If you are trying to increase your score and need a new vehicle, consider getting an auto loan.  These are relatively easy to get, and they can be refinanced as your credit improves.  Pay the loan on time every month, otherwise it counts against you instead of in your favor.

They Started Early

The older the oldest entries on your credit report, the higher your record.  People with high credit scores, on average, have accounts that are 25 years old or more.

While you can’t go back and change your personal history, you can make positive changes going forward.  Many people mistakenly believe that they can raise their credit scores by closing unused accounts.  However, what this really does is shorten your available credit history.  Make sure that you keep old accounts active by using those cards on a regular basis.

We recommend charging a regular payment, such as your cell phone bill or a health club membership, to your oldest card.  Set up automatic payments so that you never forget to pay the bill. This way, you keep the card active without increasing your expenses, and, you make sure that it never goes overdue.

By emulating the people with the top credit scores, you can increase your score and get access to better opportunities.  For more information on how to help increase your scores go to

Financial Market Affects June 29, 2015

This past week the bond market went on a rollercoaster ride driven by two major events, the seemingly never-ending Greek debt crisis and the June Employment Situation Summary (Jobs Report) from the Department of Labor.

The bond market began the week by spiking higher in a flight-to-safety buying spree while the U.S. stock market joined a global equity market sell-off as Greece moved closer to defaulting on its debt.  Greece was unable to agree to a cash-for-reform deal to resolve its sovereign debt with its creditors and has technically defaulted on a 1.6 billon euro ($1.73 billion) loan installment due to the International Monetary Fund.  This technical default could eventually lead Greece to a full default on its entire 323 billion euro ($360 billion) debt load, and should this happen; the consequences could shock the European banking sector to its very core.  The world will know more this week whether or not the Greek people will accept a creditor cash-for-reform proposal following the results of Sunday’s Greek referendum on the matter.

So… what would likely happen with a full-blown Greek default?  First, around $5 billion worth of credit default swaps (CDS) that investors in Greek bonds took out to protect themselves from a default would come into play.  The financial institutions that issued the CDS would be required to pay the face value of the bonds immediately, erasing some profits from their bottom lines.  Also, foreign banks holding Greek government debt would need to write down or possibly write off the entire value of that debt due to the default.  This scenario is very similar to what happened in 2008 when the banks were forced to write down billions of dollars in mortgage-backed securities as a result of the housing bust.

European banks have considerable exposure to Greek government debt with their holdings of $54.2 billion in Greek bonds.  German lenders are the largest foreign owners of Greek government debt with a total of about $22.7 billion in bonds.  French lenders have about $15 billion worth of Greek government debt exposure.  Also, in reference to the Greek private debt category, Moody’s recently issued credit warnings for three large French banks: BNP Paribas, Societe Generale and Credit Agricole.  These banks hold a combined $65 billion in public and private Greek debt, and if they have to write down an amount this large it could lead to greater chaos in the global financial system.

In economic news, the National Association of Realtors reported its seasonally adjusted Pending Home Sales Index increased 0.9% to 112.6 in May, climbing to its highest level in more than nine years.  The consensus forecast had called for the Index to rise 1.4%.  The index increased 10.4% over the past 12 months to put it just below the April 2006 level.


Also in the housing sector, the S&P/Case Shiller Index for April showed home prices continued to rise, but at a slower rate than the prior month of March.  The 20-city Index increased 4.9% year-over-year, but the rate of annual price gains slowed in urban areas.  The consensus forecast had called for a rise of 5.6%.  The 10-City Composite Index gained 4.6% year-over-year while the National Home Price Index, covering all nine U.S. census divisions, recorded a 4.2% annual gain in April 2015 versus a 4.3% increase in March 2015.

Furthermore, the Commerce Department reported U.S. Construction Spending increased 0.8% to a seasonally adjusted annual rate of $1.036 trillion in May versus the consensus forecast for a 0.3% gain, reaching its highest level since October 2008.  Economists at RDQ Economics in a note to clients stated “Construction spending looks set to add significantly to second-quarter GDP growth, while upward revisions to the first quarter could add as much as a half-percentage point to real GDP growth.”

In the mortgage industry, the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 26, 2015 showed the Market Composite Index, a measure of mortgage application volume, fell -4.7% from a week earlier.  The Refinance Index dropped 5% from the previous week to its lowest level since December 2014.  Meanwhile, the seasonally adjusted Purchase Index declined 4% from a week earlier.  The refinance share of mortgage activity declined to 48.9% of total applications from 49.0% the prior week.  The adjustable-rate mortgage share of activity remained unchanged at 7.0% of total applications.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance increased to 4.26%, its highest level since October 2014, from 4.19%, with points paid dropping to 0.33 from 0.38.

The week ended with bond prices moving higher following data from the June Employment Situation Summary (Jobs Report) showing a stumbling labor market that cast doubts about whether the Federal Reserve would begin to hike interest rates sometime during the fourth quarter.

The Labor Department reported employers added 223,000 workers in June which was less than the 230,000 consensus forecast.  It also downgraded its jobs numbers from April and May resulting in 60,000 fewer jobs created than previously reported.  Another poor data point was the absence of any wage growth.  The 0.0% hourly earnings number should disappoint the Fed which has counted on growing wages to help support consumer spending and move inflation toward their 2% target.

Meanwhile, bond traders who were worried about Greece’s Sunday referendum regarding austerity programs in exchange for another bailout, bought safe haven U.S. treasuries ahead of the three-day Independence Day weekend.

For the week, the FNMA 3.5% coupon bond gained 54.7 basis points to end at $102.77 while the 10-year Treasury yield fell 9.0 basis points to end at 2.39%.  Stocks ended the week with the NASDAQ Composite losing 71.30 points to close at 5,009.21.  The Dow Jones Industrial Average dropped 216.57 points to end at 17,730.11, and the S&P 500 fell 24.71 points to close at 2,076.78.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 5.45%, the Dow Jones Industrial Average has lost 0.52%, and the S&P 500 has increased 0.86%.  The national average 30-year mortgage rate fell to 4.13% from 4.20% while the 15-year mortgage rate decreased to 3.29% from 3.37%.  The 5/1 ARM mortgage fell to 3.11% from 3.15%.  FHA 30-year rates dropped to 3.75% from 3.85% and Jumbo 30-year rates decreased to 3.92% from 3.98%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($102.77, +54.7 bp) traded within a 94 basis point range between a weekly intraday low of $102.22 and a weekly intraday high of 103.16 before closing at $102.77 on Thursday in a volatile, holiday shortened week.  The mortgage bond market was weak on Tuesday and Wednesday, but bounced back strongly on Thursday following a disappointing June Jobs Report.

Thursday’s strong showing resulted in the formation of a two-day bullish engulfing lines candlestick pattern, a moderately strong buy signal.  Furthermore, the slow stochastic oscillator is now “in sync” with this candlestick buy signal with its buy signal from a positive stochastic crossover.  Overhead resistance is now defined by the 25-day moving average at $103.06 while technical support remains at the 50% Fibonacci retracement level located at $102.36.  If Thursday’s upward momentum can be maintained this coming week, we should see a slight improvement in mortgage rates.  The wild card for the week remains the Greek debt crisis and whether or not a deal can be struck between the Greek government and its many European Union creditors.

Chart:  FNMA 30-Year 3.5% Coupon Bond


Economic Calendar – for the Week of July 6

The economic calendar quiets down this week and features the ISM Services Index for June on Monday; Crude Oil Inventories and the Federal Reserve’s FOMC Minutes on Wednesday; and the weekly Initial Jobless Claims report on Thursday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.


Road Signs – Get Interrupted Less, Achieve More

By Jeff Davidson

With office and workplace interruptions on the rise, career professionals everywhere are experiencing monumental struggles to stay focused.  By some studies, today’s typical worker is interrupted every 11 minutes and then takes another 25 minutes to return to the original task because of all the other distractions along the way.

The more often you can keep interruptions at bay, stay focused on the task at hand, and allow yourself to do your best work, the more you’ll get done in a day.  If the position for which you are hired requires that you be interrupted all day long, that’s one thing.  Most of us, most of the time, have options when it comes to safeguarding our workspace and allowing us to have some uninterrupted stretches of time where we can concentrate on the project or task before us.

Why do so many of us, invite interruptions, or short of that, not vigilantly keep them at bay?  Of many possible explanations for this phenomenon, three stand out:

  1. Social media has enveloped the world, aided and abetted by mobile devices. Today, too many people are more fixated on the next communication they receive than staying focused on the task at hand. ’Nuff said.
  1. Television, radio, movies, and all other forms of news, information, and entertainment have inexorably increased the pace at which they disseminate their messages.

The average camera angle on television changes every 3.5 seconds.  Radio announcers now speak at faster paces than their counterparts of a generation ago.  The typical movie plot and pacing is noticeably faster than movies of generation ago.

While we speak at about 125 words a minute, we can listen and intake information at three times that rate.  Unless we train ourselves to slow down our focus on the message before us, and not be mentally drifting ahead, the swirl of communication that surrounds us pushes us to absorb information faster and faster.

Conversely, our professional tasks often require a slow pace.  Our concentration often cannot be rushed.  It takes a rare individual today to maintain separation between the rate at which he or she absorbs information from popular media, versus the rate at which he or she can understand, say, technical instructions, plotting a new strategy, or absorbing an internal staff report.

  1. Reading is not pretty. Much of the work that you do in the course of a given day involves reading. By some studies, career professionals typically read between two to four hours a day, including emails, email attachments, other forms of electronic messaging, and traditional print documents.  When you read, you’re just sitting there, looking at a page or a screen.  To those passing by, say in the hallway, it may appear that you’re not doing too much.

By contrast, walking to the copier, posting a note on the wall, or conducting a meeting with others, requires some form of action.  Who among us would rather sit and study, versus taking some sort of action?  As human beings, we are predisposed to take action.  Sitting and concentrating requires discipline.  Contemplating new instructions or new tasks requires mental consternation which can be accompanied by mental angst.

The ability to communicate with anybody at any time from any place around the world; the global media that bids us to pay attention to its ever-rapid dissemination of information, communication, and entertainment; and our inbred predisposition to take action rather than sit and contemplate, makes it seem as if the deck is stacked against you.

Yet, trailblazers in every industry and profession understand the importance of safeguarding their workspace from interruptions and distractions that would take them off course and render them from being less productive than they otherwise could be.

Such blessed individuals understand the need for quiet time.  They are willing to barricade themselves from the outside world, if that’s what it takes, to achieve mental clarity.  Once having done so, they can perform at their best.  They can make effective decisions.  They are better able to lead.

In which camp will you choose to be?  Will you join the masses who are buffeted daily by all manner of temptation resulting in less than stellar work performance?  Or will you have the mental and emotional resolve to join the winners?  Interruptions are the antithesis of concentration.  To be at your best, you and you alone must take the steps necessary to safeguard your work environment.  No one is coming to help you.

The choice is up to you.

Jeff Davidson is “The Work-Life Balance Expert®,” is a preeminent time management authority, has written 59 mainstream books, and has been widely quoted in the Washington Post, Los Angeles Times, Christian Science Monitor, New York Times, and USA Today.  Cited by Sharing Ideas Magazine as a “Consummate Speaker,” Jeff believes that career professionals today in all industries have a responsibility to achieve their own sense of work-life balance, and he supports that quest through his websites and and through 24 iPhone Apps at