The stock market took it on the chin in a big way on Thursday!

The stock market took it on the chin in a big way on Thursday!

The stock market took it on the chin in a big way on Thursday with a drop of 265 points, which comes on the heels of additional declines on Monday and Tuesday.  The cause of the steep decline this week is focused on 3 main areas, global economic slowdown, rising tensions with Russia, and the Middle East.

The tech heavy Nasdaq tumbled 100 points on Thursday led down by Apple.  It seems that the initial concerns about the bending and warping of the new Iphone 6 and 6 Plus is becoming more and more of a problem.  What started out as a few random comments on social media, is now becoming larger and more vocal day by day.

Apple, while trying to figure out what they will need to do to address the problem, they are doing their best towards social damage control. Apple has set new sales records with the release of the new phones, however if the issue of bending continue to grow, it is likely that future sales will be hurt significantly until Apple redesigns the casing, This of course will cut into sales and profits.

Russia this week was vocal in stating that the U.S, does not have the authority to engage in the bombing in Syria according to international law.  The U.S, differs in opinion and the disagreement is further ratcheting up tensions between the two superpowers.

Finally, Japan, China and Europe, are all showing signs of economic slowdown.  Although the United States is continuing to slowly chug along, declines in the 3 largest economies behind the U.S. is creating fear within the investment community.  One thing that became clear during the great recession is that when something happens in one large economy, it will have significant impact throughout the world.

The latest housing data was disappointing with existing home sales falling 1.8 percent in August to a lower-than-expected annual rate of 5.05 million.  Sales are also down from the same time last year by 5.3 percent.  This is greater than the previous month’s difference of 4.5 percent.  Limited supply continues to be a factor holding down sales which remained stable at 5.5 months.

Appreciation of home prices is stalling according to the Federal Housing Finance Agency.  The most recent report for July indicated that home prices rose only 0.1 percent versus 0.3 percent in the prior month.  Additionally, the year-over-year rate declined from 5.1 percent in June to 4.4 percent in July.

The one housing report that was a highlight for the week is the new homes sales report.  New home sales jumped 18.0 percent for the month of August.

JJ Mack
916-517-1800 x 300
JJ.Mack@apmortgage.com
www.apmcroseville.com

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen!

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.

Investors are loving the latest news from the Fed regarding interest rates.  This week there was tons of speculation on whether the FOMC minutes released on Wednesday afternoon would have different wording in them regarding the Fed’s plan for the future of interest rates.

Many experts believe that the stock market has been steadily rising to new records because business loves borrowing money at low rates.  It makes it easier for companies to turn profits which is what investors want.  Concern this week was that the Fed might change their language towards when they might increase rates since the economy has been doing better.

Well…the Fed held steady with the course and plan for interest rates and they believe that increases will not occur until the summer of 2015.  At that time increases are expected to be very gradual in nature as to not disrupt economic growth.  This is the news that markets were hoping for and they got it!  The Dow Jones Industrial Average has risen 284 points for the first 4 days of the week.

Mortgage rates on the Fed news, have risen to their highest point in 4 months.  As investors feel more confident in the future of the stock market, this will continue to drive money out of government bonds and into the stock market.  This shift in where investors place their money causes bond yields and mortgage backed securities to rise which mortgage rates are based upon.

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.  The Mortgage Bankers Association of American reported that applications for purchases and refinances jumped 5.0 percent and 10.0 percent respectively.

It appears that homebuilders are being a little cautious about the future of housing as indicated by August’s housing starts and permits.  Starts on new home construction declined 14.4 percent which is in stark contrast to July’s jump of 22.9 percent.  Permits for new construction declined 5.6 percent after a rise of 8.6 percent in the prior month.  The multifamily component made up the majority of the decline in the latest data which means that single family construction has not contracted significantly.

In other news, inflation continues to be a non-factor which is one of the reasons the Fed has elected to keep interest rates where they are.  For the longest time the Fed has indicated that if inflation shows a pattern of rising, they might need to change their interest rate policy sooner than expected.

First time jobless claims came in much lower than expected.  At 280,000 for the week ending September 18^th, this number is far below anyone’s expectations and shows an improving labor market.

JJ Mack
JJ.Mack@apmortgage.com
916-517-1800 x 300
www.apmcroseville.com