We start the week on an optimistic note after weeks of volatility, poor economic news, and hurricane Irene destruction.
Today, the Dow shot up 254.71 points to 11,539.25, and the S&P 500 finished at 1210.08 (up 2.83 percent). Consumer spending increased 0.8 percent in July from June, which is the largest jump in five months. Personal income increased 0.3 percent, which, contextualized by consumer spending, suggests people reached deeper into their pockets in July. Hurricane Irene caused less damage than expected. Kinetic Analysis Corporation expects the cost of damages to insurers will be $2.6 billion. Back when the storm was projected to hit NYC as a Category 2, analysts thought the damage could be up to $14 billion. The uninsured may have sustained damages up to $7 billion. Of course, with 20 deaths, billions of dollars of damage, lost revenue opportunities, and the current danger of severe flooding, Hurricane Irene had tragic consequences and less damage is just a small reason for optimism.
On the negative side, real estate numbers continue to struggle, specifically in the purchase sector. July pending home sales fell 1.3 percent from June to July, according to the National Association of Realtors. Last week saw the lowest mortgage purchase application index number in 15 years. Home prices continue to drop. Last week, the national average of fixed interest rates has the 30 year fixed (4.22 percent) and 15 year fixed (3.46 percent) slightly up from lows, but still a bargain. Central Coast Lending offers a 30 year rate at 3.875 percent (4.028 percent APR) and a 15 year rate at 3.250 percent (3.430 percent APR). Remember, all rates subject to change based on the market.
Back to the positives, the market has rallied on optimism of European economic news, as two banks merged to gain strength against the tide of the debt crisis.
As a result of the strong day on the market, US bond yields have been increasing as investors move away from the safe haven of bonds and back to stocks. As this happens, interest rates will start to increase again. Keep an eye out this week for the S&P/Case-Shiller Home Price Index for June, the consumer confidence index for August, and the Employment Report for August. These numbers will have some barring on how the market settles at the end of the week. For daily updates on the market, check Central Coast Lending’s Facebook. For longer posts about the economic issues of the day, check Central Coast Lending’s Blog.