January 6th, 2014 9:23 AM by Mel Samick
This New Year's Eve will be like every other New Year's Eve, a time when one gets so festive that you kiss the person you've been married to for the past 20 years. New Years celebrations have existed ever since Julius Caesar introduced the Julian calendar in 45 B.C. Since December 31st, 1907, the biggest tradition in the United States is the dropping of the Times Square ball in New York City. Approximately one million people gather in Times Square to watch the ball drop. New Year's eve resolutions date back to the Ancient Babylonians and can you guess what the most common New Year's resolution is?...None other than to lose weight. Black-eyed peas are consumed all around the country on New Year's Day as they are thought to bring you good luck. Anyone planning to celebrate New Years in Italy? The Italians wear red underwear for good luck so pack appropriately. Whatever the case may be, hopefully Wall Street finds the same luck it had in 2013.
As Wall Street's best year in more than 15 draws to a close, the S&P 500 has risen 29 percent so far in 2013, its best annual performance since 1997. The Dow Jones industrial average is up 26 percent while the NASDAQ is up nearly 38 percent. One of the market's biggest boosts this year, the Federal Reserve's stimulus program, will not be as strong a factor in 2014 after the Central Bank announced a slowing of the program in December. The Fed, beginning in January, will buy $75 billion in Treasuries and mortgage-backed bonds per month, down from $85 billion, and Fed Chairman Ben Bernanke, whose term expires on January 31, suggested that the U.S. Central Bank could continue to slowly reduce that stimulus throughout 2014. In the latest week, the Dow rose 1.6 percent while the S&P was up 1.3 percent and the NASDAQ rose 1.3 percent.
U.S. Consumer Spending, which accounts for more than two-thirds of U.S. economic activity, posted its largest increase in five months in November, the latest suggestion of sustained strength in the economy, as the year winds down. The Commerce Department said last Monday that Consumer Spending rose 0.5 percent after advancing by a revised 0.4 percent in October. It was the seventh straight month of increases. In related news, sales during the 2013 U.S. holiday season grew from a year earlier as retailers used higher discounts and promotions to attract customers in a season with fewer shopping days, according to MasterCard Advisors. Holiday sales between November 1 and December 24 rose 2.3 percent, compared with 0.7 percent a year earlier. Retailers slashed prices and used other promotions to lure customers in a season that typically generates 30 percent of sales and 40 percent of profits.
Before we delve into mortgage rates, here is some holiday cheer. On December 9th, the Federal Reserve released its Z.1 data revealing that homeowners in the United States had the value of their home equity increase $417B in the third quarter and $2.2T over the past year. Some analysts believe that this increase could support the issuance of home equity loans by banks, improve the credit profile of the U.S. consumer, increase the pool of borrowers available to refinance, and increase the mobility of the U.S. homeowner. The Commerce Department reported last Tuesday that New-Home Sales dipped 2.1 percent in November. But stronger figures for the previous three months suggested that housing might be regaining strength after a summer lull. Purchases of new U.S. homes are holding at near five-year highs and showing that the housing recovery was gaining momentum even as mortgage rates continue to climb. Home purchases are strengthening as builders respond to pent-up demand unleashed by employment gains and record-high stock prices.
Interest rates are starting their push higher to more normal levels after falling to historic lows in the aftermath of the 2008 financial crisis. So far, stock investors have shrugged off rising rates, preferring to focus on the positives related to a stronger economy. Wall Street has also been soothed by comments from the Fed that they will remain "easy" with policy, despite its move to start reducing stimulus. After hitting its highest level since July 2011, the 10-year Treasury note yield, used as a barometer of mortgage rates and other consumer loans, closed at 3.01 percent. Average U.S. rates for fixed mortgages crept higher last week but remained low by historical standards. Mortgage buyer Freddie Mac said last Thursday that the rate on the 30-year loan increased to 4.48 percent. The average on the 15-year fixed loan rose to 3.52 percent. Stability will be a focus for 2014. On the bright side, a rate rise in 2014 could be an indication of an improving economy and stronger demand for banking products such as consumer loans and credit lines.
Information Provided by NYCB Capital Markets