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Market Update June 8th

Market Update June 8th
June 8, 2015 wpengine

Application activity is sputtering based upon the Mortgage Bankers Association’s most recent application index for the week ending May 29th. It is not surprising that mortgage applications have slowed given the recent rise in mortgage rates.

Applications for purchase loans declined 3.0 percent. Refinances, which are far more interest rate sensitive, plummeted 12.0 percent. Although purchase applications are down, they remain ahead of last year by 14 percent.

Construction spending is once again showing signs of life. April’s reading indicates spending is up 2.2 percent which is well above many analysts’ expectations. Spending on residential construction rose 0.6 percent with strong gains posted for both single-family and multi-family homes. It does not come as much of a surprise that spending has increased based upon April’s jump in housing starts and permits.

Construction spending in the private non-residential area looks very strong with a jump of 3.1 percent. The increase was led by gains in the power and office sectors. The public sector is also spending strongly on highways, streets, and educational buildings. The gain in public spending came entirely from the state and local governments as federal construction spending declined for a second straight month.

On Wednesday ADP released their monthly estimate on employment. ADP’s latest estimate showed that private payrolls rose a moderate 201,000 in May. ADP unfortunately has a spotty track record on accurately predicting payroll numbers. Just last month ADP missed the April numbers by a long shot. ADP forecast only 169,000 new jobs; however the actual jobs numbers showed a healthy 213,000 increase. On Friday the national employment figures will be released. Stay tuned to see how accurate ADP is this month.

First time jobless claims continue to run very low, down 8,000 in the May 30 week to 276,000. The 4-week average is up slightly to 274,750. Overall the 4 week average is running about 5,000 lower than the same time last month. Continuing jobless claims are telling the same story. They are down by 30,000.

Catching the markets by surprise on Thursday, the International Monetary Fund (IMF) managing director Christine Lagarde, announced at a Washington briefing that the Fed should wait until the first half of 2016 to raise interest rates. The IMF making a statement or recommendation is virtually unheard of.

  • Ms. Lagarde in her speech stated that there are many indications of a potential U.S. economic slowdown as well as a worldwide one. The IMF believes that raising interest rates in the U.S. would not only negatively impact the U.S. economy; it could impact global markets as well.
    This week’s potential market moving reports:
    Wednesday June 10th – MBA Applications
    Thursday June 11th – First Time Jobless Claims & Retail Sales
    Friday June 12th – Producer Price Index