For the week of September 11, 2017 — Vol. 15, Issue 36

>> Market Update

QUOTATION OF THE WEEK..."Do. Or do not. There is no try."--Yoda, Star Wars character created by American filmmaker George Lucas

INFO THAT HITS US WHERE WE LIVE... Last Thursday, major credit bureau Equifax revealed it was the victim of a "cybersecurity incident" that could impact up to 143 million consumers. They claim the breach involved data on a U.S. website application and not their core credit reporting databases. The company said it will send direct mail notices to everyone whose data was breached and that consumers can also check at equifaxsecurity2017.comSecurity experts advise people affected to freeze their accounts immediately at all three credit bureaus--Equifax, Experian and TransUnion--and sign up for fraud protection services such as LifeLock, EZShield and Identity Guard.

Thanks to rising home prices and tight supply in many markets, Fannie Mae's latest Home Purchase Sentiment Index reported more respondents think now is a good time to sell than a good time to buy. But the share of those who said mortgage rates will go down went up to 45%! Low rates certainly are helping, as mortgage originations went up 37% in Q2, and the Mortgage Bankers Association reported purchase applications up 1% for the week ending September 1Finally, the head of the Small Business Administration said that her agency is set to give out $3.3 billion in Hurricane Harvey disaster loans to uninsured homeowners and businesses. Excellent.

BUSINESS TIP OF THE WEEK... What makes you unique? Think about it. Ask others who've worked with you. When you determine what your special value is, focus on that to build your business.

>> Review of Last Week

LESS APPETITE FOR RISK... The health of the stock market depends on investor willingness to take on the greater risk involved. In the holiday-shortened week, Wall Street's appetite for risk was trimmed by too many worries, from Hurricane Harvey to Hurricane Irma, to continued geopolitical concerns about North Korea. The result? The three major market indexes headed down for the week, though not by that much. The S&P 500 in fact ended just 0.8% below its all-time high, so this wasn't considered a turnaround from the positive market sentiment we've seen since the election. What little economic news we had was pretty good anyway. 

The President and House and Senate leaders engineered a budget agreement that offers an extension of the government's funding and debt ceiling, as well as federal money for hurricane relief. The ISM Services index rose to 55.3 in August, well above the 50 level signaling expansion in the sector of the economy that provides the vast majority of our jobs. Even July's Trade Balance came in at a smaller than expected $43.7 billion deficit. In the past year, exports are up 4.9%, almost matching the growth of imports, up 5.1%. And a deeper look into August employment data revealed 30,000 new construction jobs, a considerable and much-needed boost.

The week ended with the Dow down 0.9%, to 21798; the S&P 500 down 0.6%, to 2461; and the Nasdaq down 1.2%, to 6360.

Wall Street's aversion to risk played nicely into the safe haven of bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .20, to $105.75. Freddie Mac's Primary Mortgage Market Survey for the week ending September 7 reported national average 30-year fixed mortgage rates fell to a new year-to-date low for the third week in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?... The number of discouraged workers--people who aren't looking for work because they do not believe jobs are available for them--has dropped to just 448,000, down 128,000 from last year.

>> This Week's Forecast

INFLATION, RETAIL SALES BOTH GROW... The forecast is for inflation to pick up a bit more, with the Consumer Price Index (CPI) and Core CPI both rising in August after falling in July. The Fed is looking for growth here, so we'll watch this closely. Retail Sales are expected to continue expanding nicely, especially when you take out volatile monthly vehicle sales in the Retail Sales ex-auto reading.

>> 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 Sep 11 - Sep 15

DateTime (ET)ReleaseForConsensusPriorImpact
W
Sep 13
08:30Producer Price IndexAug0.3%-0.1%Moderate
W
Sep 13
08:30Core PPIAug0.2%-0.1%Moderate
W
Sep 13
10:30Crude Inventories09/09NA4.6MModerate
Th
Sep 14
08:30Initial Unemployment Claims09/09310K298KModerate
Th
Sep 14
08:30Continuing Unemployment Claims09/02NA1.940MModerate
Th
Sep 14
08:30Consumer Price Index (CPI)Aug0.3%0.1%HIGH
Th
Sep 14
08:30Core CPIAug0.2%0.1%HIGH
F
Sep 15
08:30Retail SalesAug0.1%0.6%HIGH
F
Sep 15
08:30Retail Sales ex-autoAug0.5%0.5%HIGH
F
Sep 15
08:30NY Empire Manufacturing IndexSep20.025.2Moderate
F
Sep 15
09:15Industrial ProductionAug0.2%0.2%Moderate
F
Sep 15
09:15Capacity UtilizationAug76.8%76.7%Moderate
F
Sep 15
10:00Business InventoriesJul0.2%0.5%Moderate
F
Sep 15
10:00U. of Michigan Consumer SentimentSep95.596.8Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months...The financial market now expects the Fed to keep rates where they are well into 2018. We'll see. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 1.0%-1.25%

After FOMC meeting on:Consensus
Sep 201.0%-1.25%
Nov 11.0%-1.25%
Dec 131.0%-1.25%

Probability of change from current policy:

After FOMC meeting on:Consensus
Sep 20  1%
Nov 1  3%
Dec 1338%