Monday, 25 April 2011 12:12
QUOTE OF THE WEEK..."I couldn't wait for success, so I went ahead without it."--Jonathan Winters
INFO THAT HITS US WHERE WE LIVE...The housing recovery isn't yet a success, but last week gave us a few good reasons to keep plugging along. First came March Housing Starts, bursting UP 7.2% to a 549,000 unit annual rate. February starts were also revised UP 6.9%. Then we found out new Building Permits surged 11.2% in March to a 594,000 annual rate and were revised UP 3.3% for February. Starts and permits are still down over 13% from a year ago, as residential construction has dropped to only 2.3% of GDP, its lowest level on record. But economists say it won't go much lower, and that's what these latest numbers are signaling.
We also had Existing Home Sales UP 3.7% in March and off only 6.3% compared to a year ago. The median existing home price rose for the month and is down just over 5% for the year, while average prices are off just over 3% from 12 months ago. Looks like existing home prices are stabilizing. Finally, the supply of existing homes dropped to 8.4 months in February. Some experts see existing home sales getting back to an annual level around 5.5 million units, but caution that the recovery will be volatile.
BUSINESS TIP OF THE WEEK...The secret to success in business? Give terrific value, treat your customers well and watch your expenses. Experts say to focus on these three things and everything else will take care of itself.
>> Review of Last Week
STOCKS REVERSE RECENT SLIDE...In a four-day week of trading, investors sent stock prices back in the right direction (UP!), as all three major indexes posted gains. This happened in spite of some negative items that could have easily pulled things the opposite way. The biggest bit of bad news came Monday when Standard & Poor's lowered its outlook to negative on the U.S. AAA credit rating. They threatened to downgrade this rating unless Washington can cut its huge federal budget deficit in the next two years. We also had the Philly Fed index showing manufacturing sentiment in that region dropping to a five-month low.
But a bunch of blow-out corporate earnings reports got everyone feeling more hopeful and started the stock market rallies. Big winners who exceeded Q1 earnings expectations included Intel, United Technologies, Yahoo! and Freeport-McMoRan. Then Capital One, Qualcomm and UnitedHealth joined the party, but the big star was Apple, with a 95% boost in earnings during its last quarter, mostly from iPhone and Mac sales, since the new iPad 2 has been slowed by a production backlog. The week ended with March Leading Economic Indicators UP better than expected.
For the week, the Dow ended UP 1.3%, at 12,506; the S&P 500 was also UP 1.3%, to 1,337; and the Nasdaq was UP 2.0%, ending at 2,820.
Bond prices drifted slightly higher for the week, as the market figured that all the federal government belt tightening would slow economic growth. This helps bonds and the price of the FNMA 4.0% bond we watch ended the week up .05, closing at $98.20. National average rates for conforming mortgages eased lower in Freddie Mac's weekly survey, and remain at historically low levels. The Mortgage Bankers Association reported demand for purchase loans UP 10% compared to the week before.
DID YOU KNOW?...Existing home sales are now at an annual rate of 5.1 million units, 32.1% above their low of 3.86 million units. This occurred in July 2010, just eight months ago.
>> This Week’s Forecast
HOUSING, THE FED, INFLATION AND A FIRST LOOK AT Q1 GDP...This is a week full of popular topics, starting with March New Home Sales, forecast to be up a bit from February. Thursday's Pending Home Sales for March will give us an idea of existing home closings a couple of months out, expected to be up a tad too. Wednesday, it's the Fed's FOMC rate decision. No one expects the rate to budge, but the policy statement will be scrutinized for signs of when that situation might change.
The inflation watch continues with Friday's Core PCE Prices for March. It should be up slightly, but not enough to concern the Fed. This key inflation indicator excludes food and gas prices which we all know are on the rise. Finally, we'll check into the overall state of the economy during Q1, with Advanced GDP expected to show growth, though at a slower rate.