Market Update for the week of February 13, 2012

Monday, February 13, 2012

QUOTE OF THE WEEK..."People can alter their lives by altering their attitudes." -- William James INFO THAT HITS US WHERE WE LIVE... People's attitudes should surely be altered by new data from the National Association of Home Builders (NAHB). Their survey released on Thursday revealed four record highs hit by home building in 2011. The average size of new homes bumped up to a record 2,522 square feet, a record-high 42% of new homes had at least four bedrooms, 28% had at least three bathrooms and 30% included finished basements, all numbers up substantially over 2010. Countering this, there were a record low 429,000 single-family housing starts for the year.
But there's hope. The NAHB's chief economist forecast a 16% increase for new-home sales and single-family starts for 2012. He cited NAHB estimates of a pent-up demand for 2 million homes coming from households that are doubled-up or waiting to buy a home. Another NAHB sponsored survey revealed 78% of Americans likely to vote in the presidential election said owning a home was one of the most important things in their lives. They feel homeownership is about family and remains part of the American dream. Freddie Mac's chief economist chimed in, "The desire for homeownership long-term is still there." BUSINESS TIP OF THE WEEK... What about your business makes you happy... and unhappy? The answers can help you discover how to motivate yourself and persuade others, since happiness is the universal motivator.

>> Review of Last Week

IT'S ALL GREEK TO WALL STREET... As of last Friday, Greek politicians couldn't come to agreement with creditors on the latest bailout proposals. That was all investors needed to hear to start selling in earnest, sending stocks down for the week, ending five straight weeks of gains. Eurozone officials are threatening to withhold needed funds unless Greece agrees to austerity measures and signs them into law. The big prob? Political gridlock could take Greece closer to default, which might threaten U.S. financial institutions.
Over here, a light dose of economic data came in mixed, as usual. The Federal deficit for January unexpectedly dropped to $27.4 billion from $50 billion in December. But the Trade deficit ballooned to $48.8 billion. Initial weekly jobless claims dipped to 358,000, but continuing claims grew to 3.52 million. Finally, preliminary University of Michigan consumer sentiment for February fell to 72.5 from 75.0 the prior month.
For the week, the Dow ended down 0.5%, at 12801; the S&P 500 closed down 0.2%, at 1343; and the Nasdaq slipped 0.1%, to 2904.
Bonds saw heavy selling pressure early in the week, but those Greek default fears helped prices recover a bit on Friday. The FNMA 3.5% bond we watch ended the week down just .08, at $103.16. Following the prior week's better than expected jobs report, national average rates inched up for some types of mortgages in Freddie Mac's weekly survey. But mortgage rates overall remain historically low.
DID YOU KNOW?...This week's Producer Price Index (PPI) is an inflation indicator for the wholesale prices of a basket of raw materials and semi-finished goods (but not services). It's a leading indicator of consumer inflation.

>> This Week’s Forecast

HOUSING STARTS, PLUS RETAIL, MANUFACTURING, THE FED, INFLATION... We're back to a ton of economic data. Thursday's January Housing Starts will grab our attention, forecast up a smidge, and Building Permits, expected a bit down. January Retail Sales are expected up, both with and without autos. The several manufacturing reads -- Empire State, Industrial Production, Capacity Utilization and Philadelphia Fed -- should also inch up.
Wednesday's FOMC Minutes from the Fed's January 25 meeting might reveal more on why they want to extend exceptionally low interest rates til late 2014. The festivities end with PPI and CPI inflation reads, expected to remain within Fed targets.