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Market Update May 23

Market Update May 23
May 23, 2016 devsite


It seems that most of the economic news that might have impacted the markets this week took a back seat to the comments made by three Federal Reserve Board members.

  • It seems that there is an increased likelihood of a rate increase in June based on their latest comments.
  • The word of a possible increase in June seemed to catch the market by surprise and within minutes of the comments the stock market went from positive to negative.

Investors have been banking on the belief that there may only be one rate increase remaining for the entire year, and that it wouldn’t occur until the fall.

  • The latest minutes released by the Fed from their last meeting indicate that board members feel the economy is continuing to grow at a stable and healthy pace.

Although an improving economy would normally create a lift to the markets as the belief that business growth will continue.

  • It seems that many investors do not like the thought of the virtually interest free money the government has been lending into the economy will come to an end.
  • Main Street and Wall Street for the most part do not seem to be coordinated with the Fed’s view on economic growth.
  • Many believe that the economy is slowing far more than the Fed is willing to recognize and that rate increases could easily stagnate economic growth.

The housing market index, which measures builder optimism, remains solid and steady at a reading of 58 for the May.

  • This is the fourth straight reading for the index at 58.
  • Anything over 50 is considered positive.
  • Home sales are cruising along at a very strong score of 65 for the last 6 months and present sale scored a 63.

The West leads the country in builder optimism with a score of 67, which is important for the continuance of new construction.

  • The South is second with a score of 60 even though it is the largest region of the country.
  • The Midwest follows at 59 with the Northeast well below every other region with a score of 36. The limited available land for building is the reason the Northeast always tends to lag behind.

Housing starts and permits picked up in April, which continues to point to a steadily growing real estate market.

  • The pace for growth is not overwhelming, but with so many other areas of the economy becoming stagnant, housing continues to be a point of strength.
  • Housing starts rose 6.6 percent to a 1.172 million annualized rate. Permits rose 3.6 percent in April to a 1.116 million rate.
  • Although the year-on-year rate for both permits and starts are slightly lower than the same time last year, the weakness is coming mostly from the multi-family sector.
  • Single family starts are up 3.3 from April of last year and permits are up 8.4 percent.

This week’s potential market moving reports are:

  • Tuesday May 24th – New Home Sales
  • Wednesday May 25th – EIA Petroleum Report and MB A Mortgage Applications
  • Thursday May 26th – First Time Jobless Claims, Pending Home Sales & Durable Goods Orders
  • Friday May 27th – GDP and Consumer Sentiment