Interest rates generally trended up last week, although we will again reiterate that bargain rates are easily found just above the lowest levels. Overall, stocks had another good week, prompting analysts to continue with the “market rally… is it empty?” speculation. What news has effected the market? Let’s take a look.
- The Dow ended the week at 13,275.20, which is over 50 points above last Friday’s close. It was a busy week for economic data, and the reports came back mixed.
- July retail sales – rose 0.8 percent after June’s dive. A welcome show of strength.
- July producer price index (PPI) – the measure of inflation rose 0.3 percent from June, and 0.5 percent year-over-year, which is the lowest percentage since October 2009.
- July business inventory/sales – inventory rose 0.1 percent and sales dropped 1.1 percent. The inventory/sales ratio rose to 1.29, highest in 2.5 years, an unwanted number and likely sign that the GDP growth will remain sluggish.
- July consumer price index (cost of living metric and the most followed indicator of inflation) – stayed flat month-over-month and is up 1.7 percent year-over-year. Decline in airfare, vehicle, and transportation prices caused the monthly decline.
- July industrial production – rose 0.6 percent
- The four-week average for weekly jobless claims – fell over 5,000 to 363,750, the lowest since March earlier this year, which was the lowest of the recovery.
Real Estate statistics:
- Mortgage applications fell last week for both purchase (-2.0 percent) and refinance (-5.0 percent)
- July housing starts declined slightly, but building permits, a better measure of long-term stability, grew 6.8 percent from the previous month.
- Shadow inventory – not so much a problem? The Wall Street Journal Developments blog wrote about the so-called “shadow inventory” of homes in foreclosure or at high risk of entering foreclosure (three months delinquent by some measures) and why this “problem” has been overstated in the media.
So the news is mixed. The market will move upon news of the European Debt situation (will Germany consent to “bail out” debt-strapped countries by ceding control and funding to the European Central Bank?). We sense that the market is in a general lull before the “fiscal cliff” storm, but we don’t see ourselves headed towards another recession (provided our politicians get their act together).
The housing market has been a bright spot, and we will have another test soon, as foreclosure activity is beginning to ramp up again. Will demand be enough to snap up newly foreclosed properties and avoid another price drop? We suspect it will be, but only time will tell.