Mel's Blog

Down the Rabbit Hole at Jackson Hole

August 28th, 2017 5:56 PM by Mel Samick

All eyes were on Jackson Hole to see what new monetary policies may be coming from the Federal Reserve and the European Central Bank. As the top banking leaders gathered at Jackson Hole last week to discuss strategy, there were many underlying forces to remain cautious of. As stocks continue to reach new highs and the Fed starts to slowly tighten monetary policy, global political tensions and soft markets are reason for concern. In the end, there wasn’t much revealed about new monetary policies. Janet Yellen defended the Obama-era financial regulations; such as, annual stress tests for banks and the Financial Stability Oversight Council. She also touched on the changes in mortgage lending. She stated that while credit is less available to borrowers these days, before the mortgage meltdown, it was too easy to obtain. She also said that there is some concern that regulations have reduced market liquidity in the bond markets. Mario Draghi, President of the European Central Bank, expects the monetary policy to be loose in Europe and defended the benefits of trade.

The Chicago Fed National Activity Index came in at a -0.01, down from +0.16. A zero value for the index indicates that national activity is expanding at its historical rate of growth. So, July’s reading was slightly below average.

Orders for Durable Goods was also down in July. The Commerce Department reported that orders for big-ticket items was down 6.8 percent, the biggest drop since August 2014. The drop is attributed to civilian aircraft. Boeing reported 162 less planes ordered in July than June. However, if you exclude civilian aircraft, the trend was slightly higher. Core Capital Goods, which is used to calculate quarterly economic growth, was 1 percent higher. Orders excluding the defense sector, though, dropped 7.8 percent in July.

The manufacturing and service sectors were also mixed in August. The Markit Flash Purchasing Manager Index fell to 52.5 from 53.3 in July – a two-month low. The Services PMI was up to 56.9 from 54.7 in July. Even though manufacturing was down, anything above 50 shows improving conditions.

Existing Home Sales ran at an annual rate of 5.44 million, according to the National Association of Realtors. That was 1.3 percent lower than June and was the lowest level of the year. Once again, inventory was to blame, as there were too many buyers and not enough sellers. This is good news, though, if you are selling as the median sales price was $258,300. Home prices are 6.2 percent higher than a year ago and the percentage of first time homebuyers rose 1 percent to 33 percent. Sales were up in the South and West but were down in the Midwest and Northeast. Meanwhile, mortgage rates hit their lowest level for 2017. The 30-year fixed rate average was 3.86 for the week of August 24. The 15 year fixed rate average was 3.16 percent. New mortgages that were originated during the period that started on April 1, 2017 and ended June 30 came to a total of $421 billion according to the Quarterly Report on Household Debt and Credit released by the Fed. U.S. mortgages outstanding on June 30 was $8.69 trillion. However, Home Equity lines of Credit, fell to $0.452 trillion down from $0.456 trillion on March 31. A year ago, outstanding HELOCs totaled $0.478 trillion.

U.S. Jobless Claims rose slightly, 2000, for the week ending August 19, according to data released by the Labor Department. The Labor Department also reported that Continuing Claims were flat, at 1.95 million, for the week ending August 12.

Information Provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on August 28th, 2017 5:56 PM



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