Market Update - For the Week of November 19, 2012

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QUOTE OF THE WEEK... "Opportunities multiply as they are seized."--Sun Tzu, ancient Chinese military general, thought to be the author of The Art of War INFO THAT HITS US WHERE WE LIVE... Investors are seizing the opportunity to invest in Home Depot, the home improvement retailer who's seizing the opportunities presented by this still young housing recovery. Home Depot just posted adjusted Q3 earnings of 74 cents a share, up 23% from a year ago, evidence there's a growing number of homeowners sinking money into their properties. Other facts back this up. The U.S. homeowner vacancy rate fell to 1.9% in Q3, a seven-year low.Many feel this signals that the economy has worked off most of the excess housing that had been built.  This better balance in the housing market is boosting home prices and builder confidence. Housing starts are up, as well as construction jobs, following a four-year slump. No wonder investors are bidding up stocks throughout the home improvement sector, including Masco, Whirlpool, Sherwin-Williams, and Home Depot's competitor Lowe's. Finally, Realtor.com reports October inventory at 1.76 million units, down 17% from a year ago and 40% below the September 2007 peak. In uncertain times, there's no place like home. BUSINESS TIP OF THE WEEK... When you truly believe in your idea, your company, or yourself, then you don't need to "sell." You just need to communicate. >> Review of Last Week DOWN TIME... Stocks headed down again, the Dow posting its fourth consecutive week of negative performance. Observers think investors are turning this down time in the markets into professional downtime, taking their money off the table as they wait for Washington to come to grips with the so-called fiscal cliff. These are the mandatory tax hikes and spending cuts that kick in January 1 unless politicians reach a deal to cut the 1.3 trillion dollar deficit some other way. The only "up" feeling came from a better than expected New York Empire Manufacturing number and the installation of new Chinese leadership, who should spike their economic growth. The rest of the economic data disappointed. On the manufacturing front, both the Philadelphia Fed index and October Industrial Production were off the mark and there was a large hike in both initial and continuing unemployment claims.October PPI producer prices were down a little and CPI consumer prices were up only 0.1%, so inflation appears to be under control. But October Retail Sales were down 0.3%. Many felt it was just superstorm Sandy temporarily impacting all the numbers.  For the week, the Dow ended down 1.8%, to 12588; the S&P 500 was down 1.4%, to 1360; and the Nasdaq was down 1.8%, to 2853.  With the damage to stocks, traders expected big advances in bonds. But treasuries ended the week with only small gains and trade overall was flat. The FNMA 3.5% bond we watch ended the week off .05, at $106.17. As Washington heads toward the fiscal cliff, investors see a safe haven in mortgage bonds, pushing rates down.National average rates for 30-year fixed rate mortgages hit a new low in Freddie Mac records dating to 1971.The Mortgage Bankers Association reported purchase loan applications UP 11% for the week and UP 22% over a year ago. DID YOU KNOW?... Sarah Josepha Hale, a magazine editor, persuaded Abraham Lincoln to declare Thanksgiving a national holiday in 1863. She also wrote the nursery rhyme "Mary Had a Little Lamb." >> This Week’s Forecast EXISTING HOMES, HOUSING STARTS, ECONOMIC INDICATORS, TURKEY!... It's a short week of economic reports, just three days of data. Monday's Existing Home Sales for October are forecast to be off a little, just like Tuesday's Housing Starts and Building Permits for October. Wednesday's Leading Economic Indicators (LEI) index and Michigan Consumer Sentiment are also expected to be down a bit. The stock market is closed Thursday for the holiday and will close early at 1 p.m. on Friday. Happy Thanksgiving to you and yours! >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.  Economic Calendar for the Week of Nov 19 – Nov 23  Date Time (ET) Release For Consensus Prior Impact M Nov 19 10:00 Existing Home Sales Oct 4.70M 4.75M Moderate Tu Nov 20 08:30 Housing Starts Oct 845K 872K Moderate Tu Nov 20 08:30 Building Permits Oct 870K 894K Moderate W Nov 21 08:30 Initial Unemployment Claims 11/17 433K 439K Moderate W Nov 21 08:30 Continuing Unemployment Claims 11/10 3.400M 3.334M Moderate W Nov 21 09:55 U. of Michigan Consumer Sentiment – Final Nov 84.5 84.9 Moderate W Nov 21 10:00 Leading Economic Indicators (LEI) Oct 0.2% 0.6% Moderate W Nov 21 10:30 Crude Inventories 11/17 NA 1.089M Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... Last week's release of Fed meeting minutes revealed they could replace their timeframe for low rates with data targets, but nothing's happened yet. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Dec 12 0%–0.25% Jan 30 0%–0.25% Mar 20 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Dec 12      <1 p="p"> Jan 30      <1 p="p"> Mar 20      <1 p="p"> This blog is an advertisement for Jean Hedges. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. © 2012 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. 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