Dow went up 73, advancers over decliners better than 2-1 & NAZ added 38. The MLP index was fractionally higher to the 253s (extending its sideways trend shown below) & the REIT index slid back 1 to the 377s. Junk bond funds were off a tad & Treasuries slid lower in profit taking. Oil pulled back to the high 58s & gold tumbled 18 to 1298.
AMJ (Alerian MLP Index tracking fund)
Homebuyers signed 1% fewer contracts to buy existing homes in Feb compared with Jan, according to the National Association of Realtors' (NAR) pending home sales index. These contracts are a future indicator of closed sales 1-2 months later. Pending contracts were 4.9% lower compared with Feb 2018. “In January, pending contracts were up close to 5 percent, so this month’s 1 percent drop is not a significant concern,” said Lawrence Yun, chief economist for the Realtors. “As a whole, these numbers indicate that a cyclical low in sales is in the past, but activity is not matching the frenzied pace of last spring.” Yun pointed to some sales growth in the West, although the region's current sales are well below the sales activity from 2018. “There is a lack of inventory in the West and prices have risen too fast. Job creation in the West is solid, but there is still a desperate need for more home construction,” he added. The drop came despite buyers having the benefit of lower mortgage rates. The average rate on the 30-year fixed was just over 5% in Nov but began falling in Dec. They started Jan just above 4.6% but fell at the start of Feb to around 4.5%, according to Mortgage News Daily. Rates then sat there throughout the month, when these sales contracts would have been signed. Closed sales of existing homes jumped nearly 12% month-to-month in Feb, also a reaction to the drop in mortgage rates at the end of the year. It may also have been simply due to more supply on the market & a cooling in home prices. Closed sales were still lower compared with a year ago. Regionally, pending sales in the Northeast declined 0.8% month to month & were 2.6% below a year ago. In the Midwest, sales fell 7.2% monthly & 6.1% annually. Sales in the South were up 1.7% monthly & down 2.9% annually, & in the West sales increased 0.5% monthly & were 9.6% below a year ago. The supply of homes for sale has been rising steadily, up just over 3% in Feb compared with a year ago. Home prices are still rising, but the gains have been shrinking each month for nearly a year.
Pending home sales drop 1% in February, despite lower mortgage rates
Kansas City Fed Pres Esther George said she’s not worried about the inflation outlook & doesn't see the need to overhaul the central bank's policy of aiming for a 2% annual inflation target. “The current outlook for inflation appears to be benign, and I consider the recent behavior of inflation to be broadly consistent with our price stability mandate,” George said in a speech. George is a voting member of the Fed's interest-rate-setting committee this year & is one of the more hawkish memebrs of the Fed. Her views contrast with doves such as San Francisco Fed Pres Mary Daly, who said yesterday that she's worried about the Fed losing credibility on delivering 2% inflation if inflation expectations drift down. “I have not viewed this as a major concern given than, aside from the effects of wide fluctuations in energy prices, inflation has remained low and relatively stable,” she said. Since 2012, core inflation as measured by the Fed's preferred personal consumption expenditure price index has fluctuated in a range of roughly 1.5-2%, except during 2015 when a strong $ pushed core inflation somewhat below 1.5%. “Should we be concerned about this low level of inflation?” George was asked. No, she answered. “It would seem reasonable that even somewhat persistent deviations from the objective, if they are limited to, say 50 basis points above or below the objective, may be acceptable, depending on broader economic conditions,” she added. “I hear few complaints about inflation being too low,” she said. “In fact, I am more likely to hear disbelief when I mention inflation is as low as measured in a number of key sectors.” She noted that former Fed Chairmen Alan Greenspan & Paul Volcker defined price stability as an inflation rate that was low & stable & not considered a key factor in the decisions of businesses & households. “In current circumstances, with an unemployment rate well below its projected longer-run level, I see little reason to be worried about inflation running a bit below its longer-run target,” she added. George said that she supported the Fed's yearlong process to evaluate alternative policy strategies, but didn't seem enthusiastic about the leading idea: an inflation target that is achieved on average over a fixed period of time. “What works in elegant economic models can have limitations and unintended consequences when put into practice,” she warned. She said she wasn’t sure that a new policy strategy would be any more effective than the current 2% inflation target. “And deliberately pushing inflation above 2% at a time when the unemployment rate is well below its presumed longer-run level could be costly,” she said. While the yield on the 10-year Treasury bond has steadily slipped since the Fed meeting, in part due to investor worries about the economy, George was upbeat about the economic outlook. While the first-qtr tracking estimates were “weak,” job gains & wage increases should support consumer spending, she said. Real personal disposable income increased almost 4% last year on a 12-month basis, she noted. “Right now the data are noisy, and we need more time and evidence to separate the signal from the noise,” George said. With high employment and low inflation, the Fed can be patient, she added.
Stocks are resting & buyers were looking for good buying opportunities today. The trade negotiations are resuming & there is a lot riding on their outcome while the stock market has been going sideways for weeks.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 58.87 | -0.54 | -0.9% |
| GC=F | Gold | 1,290.70 | -19.70 | -1.5% |
The US economy grew slightly slower in Q4 than previously reported,
with the GDP lowering to 2.2% in a 2nd
reading. That's marked down from
the initial reading of 2.6%, according to data released by Bureau
of Economic Analysis (BEA), largely because of a slowdown in consumer
spending (which lowered to 2.5% from 2.8%). Despite the downward revision, however, GDP for
the entirety of 2018 remained at 2.9% (compared to 2.2% in
2017), narrowly missing the the administration's goal of 3%
growth for the year. That's essentially the same annual growth as in
2015, which was the fastest pace since 2005. The
BEA generally provides 3 estimates of the GDP for each qtr;
however, they will only provide 2 readings this qtr. In the Jul-Sep period, the economy grew at a 3.4% rate.
GDP revised lower to 2.2% in fourth quarter
Homebuyers signed 1% fewer contracts to buy existing homes in Feb compared with Jan, according to the National Association of Realtors' (NAR) pending home sales index. These contracts are a future indicator of closed sales 1-2 months later. Pending contracts were 4.9% lower compared with Feb 2018. “In January, pending contracts were up close to 5 percent, so this month’s 1 percent drop is not a significant concern,” said Lawrence Yun, chief economist for the Realtors. “As a whole, these numbers indicate that a cyclical low in sales is in the past, but activity is not matching the frenzied pace of last spring.” Yun pointed to some sales growth in the West, although the region's current sales are well below the sales activity from 2018. “There is a lack of inventory in the West and prices have risen too fast. Job creation in the West is solid, but there is still a desperate need for more home construction,” he added. The drop came despite buyers having the benefit of lower mortgage rates. The average rate on the 30-year fixed was just over 5% in Nov but began falling in Dec. They started Jan just above 4.6% but fell at the start of Feb to around 4.5%, according to Mortgage News Daily. Rates then sat there throughout the month, when these sales contracts would have been signed. Closed sales of existing homes jumped nearly 12% month-to-month in Feb, also a reaction to the drop in mortgage rates at the end of the year. It may also have been simply due to more supply on the market & a cooling in home prices. Closed sales were still lower compared with a year ago. Regionally, pending sales in the Northeast declined 0.8% month to month & were 2.6% below a year ago. In the Midwest, sales fell 7.2% monthly & 6.1% annually. Sales in the South were up 1.7% monthly & down 2.9% annually, & in the West sales increased 0.5% monthly & were 9.6% below a year ago. The supply of homes for sale has been rising steadily, up just over 3% in Feb compared with a year ago. Home prices are still rising, but the gains have been shrinking each month for nearly a year.
Pending home sales drop 1% in February, despite lower mortgage rates
Kansas City Fed Pres Esther George said she’s not worried about the inflation outlook & doesn't see the need to overhaul the central bank's policy of aiming for a 2% annual inflation target. “The current outlook for inflation appears to be benign, and I consider the recent behavior of inflation to be broadly consistent with our price stability mandate,” George said in a speech. George is a voting member of the Fed's interest-rate-setting committee this year & is one of the more hawkish memebrs of the Fed. Her views contrast with doves such as San Francisco Fed Pres Mary Daly, who said yesterday that she's worried about the Fed losing credibility on delivering 2% inflation if inflation expectations drift down. “I have not viewed this as a major concern given than, aside from the effects of wide fluctuations in energy prices, inflation has remained low and relatively stable,” she said. Since 2012, core inflation as measured by the Fed's preferred personal consumption expenditure price index has fluctuated in a range of roughly 1.5-2%, except during 2015 when a strong $ pushed core inflation somewhat below 1.5%. “Should we be concerned about this low level of inflation?” George was asked. No, she answered. “It would seem reasonable that even somewhat persistent deviations from the objective, if they are limited to, say 50 basis points above or below the objective, may be acceptable, depending on broader economic conditions,” she added. “I hear few complaints about inflation being too low,” she said. “In fact, I am more likely to hear disbelief when I mention inflation is as low as measured in a number of key sectors.” She noted that former Fed Chairmen Alan Greenspan & Paul Volcker defined price stability as an inflation rate that was low & stable & not considered a key factor in the decisions of businesses & households. “In current circumstances, with an unemployment rate well below its projected longer-run level, I see little reason to be worried about inflation running a bit below its longer-run target,” she added. George said that she supported the Fed's yearlong process to evaluate alternative policy strategies, but didn't seem enthusiastic about the leading idea: an inflation target that is achieved on average over a fixed period of time. “What works in elegant economic models can have limitations and unintended consequences when put into practice,” she warned. She said she wasn’t sure that a new policy strategy would be any more effective than the current 2% inflation target. “And deliberately pushing inflation above 2% at a time when the unemployment rate is well below its presumed longer-run level could be costly,” she said. While the yield on the 10-year Treasury bond has steadily slipped since the Fed meeting, in part due to investor worries about the economy, George was upbeat about the economic outlook. While the first-qtr tracking estimates were “weak,” job gains & wage increases should support consumer spending, she said. Real personal disposable income increased almost 4% last year on a 12-month basis, she noted. “Right now the data are noisy, and we need more time and evidence to separate the signal from the noise,” George said. With high employment and low inflation, the Fed can be patient, she added.
Fed’s George says inflation is fine where it is
Stocks are resting & buyers were looking for good buying opportunities today. The trade negotiations are resuming & there is a lot riding on their outcome while the stock market has been going sideways for weeks.
Dow Jones Industrials
No comments:
Post a Comment