June 19th, 2013 9:41 AM by Mel Samick
Equities were about as volatile as the play at the U.S. Open. Merion Golf Club humbled the greatest in the golf world this past weekend. Of the 456 rounds played over the four day tournament, only 23 rounds were under par. Stocks closed out a volatile week on Wall Street, broadly in the red, led lower by banks, as investors digested a batch of mixed economic reports and remained on edge as concerns lingered over whether the Central Bank will pare back its stimulus programs. Adding to investors’ woes was the IMF’s pessimistic opinion that even though the underlying fundamentals in the U.S. are gradually improving, the economy is still being restrained by government spending cuts.
In major indices, the S&P closed at 1,623 while the Dow ended the trading week at 15,070. With investors adjusting their near-term volatility expectations, the CBOE Volatility Index (VIX) climbed throughout the week to notch its highest weekly close of the year, and ended near 17. Most key S&P sectors ended in the red for the week, dragged down by financials and energy, while telecoms bucked the downward trend. On the economic front, the University of Michigan's Consumer Sentiment index scaled back to a 82.7 June prelim reading after hitting its highest in nearly six years in May. Retail sales in May did manage a nice 0.6 percent rise, the largest gain since February, mainly due to expensive auto purchases. Also, for the month of May, Industrial Production was unchanged while higher energy and food prices led Producer Prices to gain 0.5 percent; it was more than expected. Excluding food and energy, core prices rose 0.1 percent for a second consecutive month. That was exactly what the consensus anticipated.
Mortgage rates maintained an upward trend for the sixth consecutive week but due to moderate economic data the upward trend appears to be slowing down. Also, at the end of the week the Conforming Fixed 30-year rate leveled out at around 3.9 percent, while the Conforming Fixed 15-year rate finished around 2.94 percent. While U.S. home prices remain about 28 percent below their 2006 peak, they’re climbing at the fastest pace in seven years, even as mortgage availability remains restricted after the housing crash. However, with a surge in housing prices and selling activities, Wall Street is ramping up financing to private-equity firms buying homes to rent, helping them accelerate purchases. Whereas this type of financing is giving an advantage to institutions competing with individuals for a diminishing pool of distressed real estate to turn into rentals, it is also providing more much-needed liquidity to the housing market.
This week, investors will be closely watching the Federal Reserve's policy-setting meeting for comments and clues into the Central Bank's plans for paring back some of its stimulus efforts. Major economic indicators this week will be the Housing Market Index and Housing Starts on Monday and Tuesday while Existing Home Sales will be released on Thursday.
Information provided by NYCB Capital Markets