Daily Rate Update: October 27-30

Tuesday – October 27

The housing sector continues to shine and has been a key metric for the overall U.S. economy. Low rates and declining supply continue to fuel higher prices across the nation with this month’s gains in lofty territory. The S&P Case-Shiller 20-City Home Price Index rose 5.2% annually in August versus the 3.8% gain expected. The July number was revised to up 4.1% from 3.9%. The National Index, covering all nine U.S. census divisions, saw a 5.7% annual increase, from 4.8% in July. Spokesperson Craig J. Lazzara said, “If future reports continue in this vein, we may soon be able to conclude that the COVID-related deceleration is behind us.”

Consumer Confidence slipped in October from September to 100.9 from 101.8 due in part to renewed virus fears. Two key components within the report showed the Present Situation Index, based on consumers’ assessment of current business and labor market conditions to 104.6 from 98.9. However, the Expectations Index or short-term conditions declined from 102.9 to 98.4. Also, the percentage of consumers saying jobs are “plentiful” rose from 23.6% to 26.5%.

This week is the heart of corporate earnings season with big names such as Merck, Caterpillar, 3M and Pfizer beating estimates this morning. Microsoft will report this afternoon after the bell. Of the companies that have reported so far this season, 84% have beaten estimates. Big tech will report this week with Apple Inc, Amazon Google and Facebook Inc all releasing their numbers and account for almost a fifth of the S&P 500’s total value.

Courtesy of Mortgage Market Guide

Thursday – October 29

In the second quarter of this year, U.S. economic activity saw its worst quarter ever plunging 31.4% after the decline of 5.0% in the first quarter. The economy essentially shut down due to the pandemic. July-August-September economic activity saw Gross Domestic Product soar by a record 33.1% versus the 30.2% expected. Back-to-back records. The previous record post-WWII was a gain of 16.7% in the first quarter of 1950. The gains were led by surges in consumer spending along with business and residential investment and strong exports.

Home borrowing costs remain at record lows in the latest survey and continue to buoy the housing market. Freddie Mac reports that the 30-year fixed-rate mortgage is at 2.81% this week with 0.7 in points and fees. A year ago at this time, the rate averaged 3.78%. “The record low mortgage rate environment is providing tangible support to the economy at a critical time, as housing continues to propel growth,” said Sam Khater, Freddie Mac’s Chief Economist. “

Americans filing for first-time unemployment benefits fell to the lowest level since early March as the sector slowly rebounds. Weekly Initial Jobless Claims fell to 751,000 for the week ended October 24, down from the 797,000 in the previous week. The 751,000 is well below the 6 million seen in late March and early April at the height of the pandemic. Continuing claims, which measures those receiving benefits for at least two weeks straight, fell to 7,756,000 from 8,373,000.

Friday – October 30

The U.S. consumer is alive and well as evidenced by strong spending numbers in September. Personal Spending surged by 1.4% in September, above the 1% expected and up from 1% in August. Incomes rose by 0.9%, also surpassing estimates. Retailers are hoping for a strong holiday season and it will depend on the American consumer as consumer spending makes up two-thirds of U.S. economic activity.

Inflation remained tame in September as measured by the year over year Core PCE at 1.5% versus the 1.7% expected, up 0.2% monthly which was inline. This tame year over year number is well below the Fed’s goal of 2.25% and higher. In other news, the October Chicago PMI 61.1% versus 59% expected. Economic data continues to stream in on the positive side. Next week is shaping up to be an event filled week with the presidential election, ADP, the Federal Open Market Committee meeting and the Jobs Report.

The U.S. stock markets have been on a seesaw ride this week impacted by no stimulus, solid economic data and a rise in virus cases. Stocks are lower as the week comes to an end as big tech reported good earnings but fell short on forecasts. The closely watched S&P 500 has lost over 6% from its recent closing high on October 12 as stimulus sputtered while COVID concerns grew. Next week will be key as to which direction stocks may take given the risk events.

Courtesy of Mortgage Market Guide