Consumers opened their wallets in December and spent on holiday shopping across the nation. Personal Spending rose by 0.4% last month, above the 0.2% expected. However, Personal Incomes were unchanged and below the 0.2% expected. Digging into the report it revealed that consumer inflation pressures were almost non-existent.
Manufacturing activity in the Chicago region declined in January from December. The Chicago PMI fell to 59.6 from 60.8 and was the lowest reading since November. Within the report it showed that the employment component fell, while the prices paid number rose. In addition, Consumer Sentiment fell to 81.2 in late January and down from the 82.5 registered in December.
Today marks the last day in office for Federal Reserve Chairman Ben Bernanke as Janet Yellen takes over the reigns as Fed Chief on Monday. Mr. Bernanke steered the US financial system through one of its worst periods in history after the financial and housing markets blew up in 2008. Ms. Yellen becomes the first woman to head the central bank in its 100-year history.
The National Association of Realtors (NAR) reported today that Existing Home Sales in December rose by 1% to an annual rate of 4.87 million units. That was slightly below the expectation of 4.90 million. In 2013, there were 5.09 million sales, up 9.1% from 2012. Within the report it revealed that the median existing home price was $198,000, up 9.9% from 2012. Inventories fell to a 4.6 month supply from 5.1 months in November.
Over in the jobs market, the Labor Department reported today that Americans filing for first time unemployment insurance rose by 1,000 in the latest week to 326,000, which was near the 327,000 expected. Taking out the weak December jobs report, which was attributed to a cold wave, the sector has been improving. But unseasonably cold weather has continued in January and the job numbers can be influenced when this month’s figures are released on February 7.
Fast food giant McDonald’s reported slightly better than expected earnings per share in its quarterly report. The company reported that it earned $1.40 billion in the fourth quarter on revenues of $7.09 billion. Global sales declined by 9.1%, while U.S. sales dropped 1.4%.
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The Mortgage Bankers Association reported this morning that its Market Composite Index, a measure of total loan application volume, rose by 4.7% in the latest week as home loan rates fell to lows not seen since November. The refinance index increased by 10%, but the purchase index declined by 4%.
In corporate earning, revenues at Coach were weaker than expected, IBM’s revenue declined while Texas Instruments forecasted weaker than expected net income. In addition, United Technologies beat earnings expectations while revenues fell. There have been 61 companies in the S&P 500 that have reported with 56% topping estimates.
The first Federal Open Market Committee meeting of 2014 will take place next week with the closely watched monetary policy statement being released at 2:00pm ET. The investing public will be looking for any additional news on the Fed’s massive stimulus program, dubbed QE III or Quantitative Easing III. The Fed revealed last May they it may begin to taper its purchases of Treasury and Mortgage Backed Securities, which sent home loan rates for a 30-year fixed from the mid 3% level to the current level of 4.5%. The Fed did begin to taper its purchases from a total of $85 billion per month to the current pace of $75 billion.
With little economic data this week to influence trading in the capital markets, Stock prices are mixed to start the holiday shortened week, while Mortgage Bonds are trading near unchanged levels. All markets were closed yesterday in observance of Martin Luther King Day. The two reports that will be released will be Thursday’s Weekly Initial Claims report and Existing Home Sales data.
In global labor news, the International Labor Organization (ILO) warned today that global unemployment is a current problem and it is set to rise. The ILO said that there were 202 million people unemployed in 2013, an increase of five million over 2012. The agency predicts that there will be 200 million new jobs created in the next four years, but the number won’t be able to keep up with unemployment that will exceed 215 million by 2018.
Several large banks across the nation are exiting from granting short term loans that carry high interest rates or so-called “Payday Loans.” Federal regulators are looking into whether or not these short term loans violate consumer protection loans. Instead of calling them Payday Loans, they have issued short term loans of several hundred dollars or less and are repaid from the customers checking account on payday. The loans often carry triple digit interest rates when calculated on an annual basis.
The housing market received good news in November as the sector continues to improve. CoreLogic reported today that its Home Price Index, which includes distressed sales, rose by 11.8% in November 2013 compared to November 2012. This marks the 21st consecutive month of year-over-year gains. Prices were up 0.1% from October to November. However, home prices still remain 17.6% below their peak from April 2006.
The Senate today agreed to push forward on extending unemployment benefits for three months for the long term unemployed, which has affected nearly 1.3 million people across the U.S. However, the Senate still has to pass the bill, and if it does pass, it would then have to pass through the Republican controlled House of Representatives where it could face some hurdles.
In an historic vote in Washington, D.C. yesterday, Janet Yellen has been confirmed as the first woman chief of the Federal Reserve Bank of the the United States. Ms. Yellen, the Fed’s vice-chair since 2010, is the first woman to head the central bank in its 100-year history. Ms. Yellen was raised in Brooklyn, New York served on the Fed’s board of governors in the 90s and serves as the San Francisco Federal Reserve Bank President.