Tuesday - January 30
The S&P Case-Shiller 20-City Home Price Index rose 6.4 percent year over year, which was in line with estimates. National home prices were up 6.2% in November year over year and are 6 percent higher than their 2006 peak. Those in the top 20 cities are still 1.1% lower, however. “Home prices continue to rise three times faster than the rate of inflation,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Without more supply, home prices may continue to substantially outpace inflation.”
The Conference Board announced on Tuesday that consumers felt more confident about the U.S. economy in January after a decline in December. The Consumer Confidence Index increased to 125.4 this month after the decline in December from November. The Conference Board said consumers’ assessment of current conditions decreased slightly, but remains at historically strong levels. Overall, consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018.
A new health care alliance is in the making in an effort to lower costs and would be free from profit-making incentives and constraints. Amazon's Jeff Bezos, Warren Buffet and JPMorgan will band together to address the health care costs to their employees and maybe, eventually, for the entire country. The headlines sent shares of health care companies lower across the board. Given the state of health care costs in the U.S., any improvement in premium prices would be welcome.
Monday - January 29
Inflation remained tame in December as the Fed's favorite inflation gauge, the December Core Personal Consumption Expenditure (PCE) on an annual basis, was unchanged at 1.5% while month-over-month saw a 0.2% rise, which was expected. Low inflation makes it tough for the Federal Reserve to hike interest rates. Within the report it revealed that Personal Spending rose 0.4% in December as demand for goods and services increased.
President Trump will gives his first State of the Union this week on Tuesday night at 9:00 p.m. ET. The address comes after the three-day shutdown in recent weeks that involved issues surrounding DACA Dreamers. Currently, President Trump's approval rating is 39% for those who approve of the job he is doing, while 56% disapprove. The president will most likely touch on immigration issues, border security, tax reform, the U.S. economy and infrastructure.
This week investors will be receiving a full dose of economic data that will cover a broad landscape of the U.S. economy that will culminate with the closely watched Jobs Report for December. In addition, housing and manufacturing data will be delivered. Throw in the two-day Fed meeting and you have a recipe for volatility.
Friday - January 26
Economic growth slipped a bit in the fourth quarter of 2017, led lower by drags on trade and inventories. The first read on fourth quarter Gross Domestic Product rose 2.6%, just below the 2.9% expected and down from 3.2% in the third quarter. Within the report, it showed that consumer spending surged 3.8%, the fastest pace in two years; this was fueled by purchases of new cars and trucks, clothing, and healthcare. Gross Domestic Product is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
On the housing front, new home sale prices are 43% higher than their 2011 lows and 22% higher than the 2007 peak. Existing Home Sales in 2017 hit 5.5 million, its highest level since 6.5 million in 2006 and just above 2016's number and up from the 5.25 million in 2006. The big drag on housing ... a nationwide lack of inventory. Inventories have decreased 31 straight months year over year and at the current sales pace the stock of homes for sale is 3.2 months, a record low.
Thursday - January 25
Digital mortgages on smartphones ... what will they think of next? JPMorgan Chase announced on Thursday it's launching a digital mortgage platform, where customers can track a loan application through closing entirely online or from any smartphone. The bank will work with Roostify, a mortgage technology provider, to offer new customer experiences through mobile phones, digital updates, eSign capabilities and direct interactions with Chase mortgage professionals.
Sales of new homes plunged in December due in part to unseasonably cold and harsh weather. This was coupled with fading sales in the South after people replaced houses soon after the September hurricanes. The Commerce Department reported that New Homes Sales fell 9.3% in December from November to an annual rate of 625,000 units, below the 679,000 expected. It was the largest decline in nearly a year and a half. November was revised lower to 689,000 units from 733,000. From December 2016 to December 2017, sales were up 14.1%. November recorded losses in all four major sectors of the U.S.: the Northeast, South, Midwest and West.
Home Depot just joined the growing list of U.S. companies to offer employees bonuses after the passage of the Tax Cut and Jobs Act. The home remodeling company will be giving hourly employees a one-time cash bonus of $1,000 and will be scaled based on a workers length of employment. However, unlike other national companies, Home Depot did not announce plans to raise wages.
Wednesday - January 24
Mortgage rates inched higher in the latest week as Bond prices declined forcing borrowing costs higher. The Mortgage Bankers Association reports that the 30-year conforming fixed-rate mortgage rose to 4.39% from 4.36% in the previous week. Within the report it revealed that the home purchase index rose 6% to its highest level since April 2010 while the refinance index increased 1%.
The National Association of REALTORS® reports that low inventories of homes for sale on the market continued to be a thorn in the side for would-be borrowers last month. December Existing Home Sales fell 3.6% from November to an annual rate of 5.570 million units versus the 5.70 million expected. Declines were seen across the board in the Northeast, Midwest, South and West. From December 2016 to December 2017, sales were up 1.1%. Inventories of homes for sale on the market fell to a 3.2-month supply, well below the 6-month supply that is seen as normal. Housing inventories are down 10.3% from a year ago.
The ongoing stream of positive news and outlooks by corporate leaders are fueling U.S. Stocks once again today. JPMorgan's Jamie Dimon says President Trump's tax cuts will be "a boom" for the economy while Goldman Sachs CEO Lloyd Blankfein says he has really liked what Mr. Trump has done for the economy. In addition, Disney announced that it will be giving $1,000 bonuses to 125,000 employees while Starbucks announced it will be boosting wages and doling out bonuses to employees.
Tuesday - January 23
Fannie Mae released its January 2018 Economic and Housing Outlook revealing that solid consumer spending and a jump in labor productivity due to increased business equipment investment should spur real Gross Domestic Product to 2.7% in 2018. Fannie predicts the unemployment rate to to average 3.7% in the second half of 2019, down from an already low level of 4.1%. The new tax laws are likely to provide a mixed response in the housing market with greater housing demand spurred on by increased disposable income while changes to tax deductions essentially reduce the subsidy for home ownership.
U.S. Stocks are slightly higher after a round of positive earnings results from Dow components J&J, Proctor & Gamble, Travelers and Verizon. Shares of Netflix are higher as the company added 8.4 million subscribers in Q4 2017, above the 6.4 million expected. At such frothy levels, Stocks are due for a pause or a correction, but as the old saying goes, "You can't fight the tape" meaning you may not want to bet on a downward move in the equity markets.
In corporate news, JPMorgan plans to raise wages, expand hiring and open new branches due in part to a growing economy and the recent changes to the U.S. tax code. The bank will open 400 new branches, hire 4,000 new workers while raising hourly wages to $15 and $18 from a range of $12 to $16.50. In addition, JPMorgan will reduce medical plan deductibles by $750 per year for those employees making less that $60,000 a year. The corporate tax rate has declined to 21% from 35%.
Monday - January 22
The U.S. government shutdown enters its third day as lawmakers failed to come to an agreement on Friday. Hundreds of thousands of government employees will be sent home today or told not to show up for work. As for the military, there will be no lapse in pay unless the shutdown continues past February 1. The Senate will reportedly take another shot at a short-term funding resolution vote today by 12:00 p.m. ET.
The International Monetary Fund (IMF) revised global economic growth to 3.9% for 2018 and 2019, slightly higher from its last update in October. The IMF cited the U.S. Tax Cut and Jobs Act for the revised growth which is expected to support growth in the U.S. and help its key trading partners. The IMF went on to say that the U.S. economy should grow by 2.7% in 2018, above the previous 2.3% estimated.
Janet Yellen's 4-years as Federal Reserve Chair ends on Wednesday January 31, 2018 with her 32nd and final meeting. During Yellen's term as Fed Chair, the nation's central bank implemented 5 rate hikes and began reversing the $4 trillion of bond purchases made over the 6 years of 2008-14 during "Quantitative Easing," a innovative program started under Fed Chair Ben Bernanke.