Monday Market Update – 05/13/2019

Rate are looking AWESOME! Time to buy some real estate!!
Have a Rad week everyone!

Market Data shown above was as of 8:20am PDT 05/13/2019 source:

Your Weekly Update Begins Here:

Escalating U.S. – China trade tensions prompted a stock market selloff for much of the week although a major reversal Friday afternoon helped soften losses. The Nasdaq Composite lost 3.0%, the Russell 2000 lost 2.5%, the S&P 500 lost 2.2%; and the Dow Jones Industrial Average lost 2.1%. Last Monday, the stock market began the week near all-time highs before President Trump decided to play some “hard ball” with China in order to persuade the Chinese to agree to a trade deal after China slowed negotiations and defaulted on its prior commitments.

As a negotiating tactic, President Trump “tweeted” the tariff rate on Chinese imports would go up to 25% at midnight last Thursday. Sure enough, at 12:01 a.m. on Friday, the tariff rate on an additional $200 billion in Chinese goods was increased from 10% to 25%. This is in addition to $50 billion in Chinese products that are already taxed at the 25% rate. China sent its chief trade negotiator, Vice Premier Liu He, to Washington to continue trade talks and the U.S. is purportedly giving China up to four more weeks to reach an agreement. Depending on the outcome, President Trump stated the tariffs may or may not be removed, but said he is also prepared to impose the 25% tariff rate on an additional $325 billion of Chinese imports if necessary. That ought to get China’s attention and prompt them to bargain in good faith.

In housing, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications increased from the prior week. The MBA reported their overall seasonally adjusted Market Composite Index (application volume) advanced 2.7% for the week ended May 3, 2019. The seasonally adjusted Purchase Index increased 4% from a week prior while the Refinance Index increased 1%. Overall, the refinance portion of mortgage activity decreased to 37.9% from 38.8% of total applications from the prior week.

The adjustable-rate mortgage share of activity increased to 6.4% of total applications from 6.2%. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.41% from 4.42% with points increasing to 0.47 from 0.46 for 80 percent loan-to-value ratio (LTV) loans.

For the week, the FNMA 4.0% coupon bond was unchanged closing at $102.656 while the 10-year Treasury yield decreased 5.70 basis points to end at 2.473%. The Dow Jones Industrial Average dropped 562.58 points to close at 25,942.37. The NASDAQ Composite Index fell 247.06 points to close at 7,916.94. The S&P 500 Index lost 64.24 points to close at 2,881.40. Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 11.21%, the NASDAQ Composite Index has gained 19.32%, and the S&P 500 Index has advanced 14.94%.

This past week, the national average 30-year mortgage rate fell to 4.24% from 4.29%; the 15-year mortgage rate decreased to 3.94% from 3.97%; the 5/1 ARM mortgage rate increased to 4.14% from 4.05%; and the FHA 30-year rate remained unchanged at 4.00%. Jumbo 30-year rates declined to 4.14% from 4.16%.

Economic Calendar – for the Week of May 13, 2019

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Date Time ET Event /Report /Statistic For Market Expects Prior
May 14 06:00 NFIB Small Business Optimism Index Apr NA 101.8
May 14 08:30 Import Prices Apr NA 0.6%
May 14 08:30 Export Prices Apr NA 0.7%
May 14 08:30 Import Prices excluding oil Apr NA -0.2%
May 14 08:30 Export Prices excluding agriculture Apr NA 0.7%
May 15 07:00 MBA Mortgage Applications Index 05/11 NA 2.7%
May 15 08:30 Retail Sales Apr 0.2% 1.6%
May 15 08:30 Retail Sales excluding automobiles Apr 0.6% 1.2%
May 15 08:30 New York Empire State Manufacturing Index May 7.7 10.1
May 15 09:15 Industrial Production Apr 0.1% -0.1%
May 15 09:15 Capacity Utilization Apr 78.8% 78.8%
May 15 10:00 Business Inventories Mar 0.0% 0.3%
May 15 10:30 EIA Crude Oil Inventories 05/11 NA -4.0M
May 15 16:00 Net Long-Term TIC Flows Mar NA $51.9B
May 16 08:30 Initial Jobless Claims 05/11 222,000 228,000
May 16 08:30 Continuing Jobless Claims 05/04 NA 1,684K
May 16 08:30 Housing Starts Apr 1,200K 1,139K
May 16 08:30 Building Permits Apr 1,280K 1,269K
May 16 08:30 Philadelphia Fed Index May 7.5 8.5
May 17 10:00 Index of Leading Economic Indicators Apr 0.2% 0.4%
May 17 10:00 Preliminary Univ. of Michigan Consumer Sentiment May 96.9 97.2

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

The FNMA 30-year 4.0% coupon bond ($102.656, unchanged) traded within a narrower 18.8 basis point range between a weekly intraday low of $102.609 on Wednesday and a weekly intraday high of 102.797 also on Wednesday before closing the week at $102.656 on Friday. Mortgage bonds traded “sideways” during the week between technical support at the 50% Fibonacci retracement level and resistance at $102.844, the intraday high of May 1. The bond is now “overbought” and trading on a weak sell signal from a negative stochastic crossover on Friday. This may result in further price weakness resulting in a slight deterioration in mortgage rates this coming week. On the other hand, if the bond manages to bounce higher off of support and remains “overbought,” we could see stable mortgage rates during the week.

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