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Market Matters – July 31, 2020 Edition


 

This past week was busy with top tier data, more Q2 earnings reports, the FOMC Statement, and more headlines surrounding the ongoing Covid-19 relief package debates in Washington.

 

Q2 GDP
IAccording to the Commerce Department, the first look at GDP for Q2 showed that the U.S. economy contracted by -32.9% on an annualized basis. Personal consumption, which accounts for roughly two-thirds of all activity, fell by -25.05%, with services accounting for nearly all of that print. Prices for domestic purchases are an inflation indicator, and those fell by -1.5% vs. a +1.4% increase in Q1. The personal consumption expenditures price index fell by -1.9% vs. the +1.3% in Q1, and when looking at the core, which excludes food and energy, PCE prices were down -1.1%. Back on the headline total, we see a -5.38% drop in fixed investment, a -3.98% drop in private inventories, -9.38% decline in exports, a +10.06% from imports, and +.82% from government spending investment. Finally, personal income was much higher; however, that was in large part due to the government payments associated with the Covid-19 pandemic. Overall, a dismal report, just slightly better than expectations, but nonetheless, a number that will take some time to reverse. As it stands now, a rebound of good proportion is expected for Q3, but that will most likely depend on the future economic impact of the virus.
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S&P Case Shiller HPI

The S&P/CoreLogic Case-Shiller House Price Index for May came in flat on a MoM bases vs. the consensus call of a +.3% increase. We also see April revised down -.1$ to +.2%. The YoY rate slipped to +3.7%, against the market consensus that it would hold at +4.0%. It was the first time in 9 months that the YoY rate fell. The National Index ticked up by .1%, but its YoY rate slipped by -.1% to +4.5%. Only 14 cities showed price increases this month, the lowest number in nearly six years. For the third month in a row, we didn’t get a reading out of Detroit. The biggest decline was seen in Minneapolis (-.7%), with others being San Francisco (-.5%), Seattle (-.2%), New York (-.1%), and Las Vegas (-.1%). The largest increases were seen in Phoenix (+.6%), Tampa (+.4%), and Charlotte (+.4%), with the rest of improvements ranging from flat to +.2%. YoY growth ranged from +1.3% in Chicago to +9.0% in Phoenix, while some of the softer increases were in New York (+2.1%) and Dallas (+2.8%).

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Pending Home Sales
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Consumer Confidence

 

Getting past the FOMC meeting (no changes – continue to focus on the recovery due to Covid-19 – Fed will continue to use all tools necessary) and some larger economic releases, the bond market had a better week seeing lower rates with the 10-yr now trading below our bottom mark of the recent range of ~.58%. This suggests that some more bullish moves are in play, yet we will advise that the market does look a little overbought, meaning it could be due for a slight correction. Overall, the market continues a ‘wait and see’ approach, and we expect the sideways, grinding trading patterns to continue. We do suggest that with any improvement, it’s another chance to grab some more locks at better pricing.

 

Call today to discuss this week’s market trends.

 

 

Pam Jamison
Loan Originator
NMLS# 277012
8310-1 N. Capital of Texas Highway, Suite 195, Austin, TX 78731
512-775-1001 | 512-582-8778
pam.jamison@primelending.com | 
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