Fed stays the course; home prices, ADP jobs increase
Posted August 1, 2012
A busy week of economic reports started off on the right foot Tuesday, with the S&P Case-Shiller Home Price Index showing an increase of 0.8% in May. This is the fourth consecutive monthly increase, and the trend begins to lend credibility to the fact that home prices may be on the mend around the country. This was well received for not only being positive, but for exceeding economists’ expectations as well.
Wednesday’s July ADP Jobs Report also managed to exceed economists’ expectations by delivering 163,000 private sector jobs for the month. The market is poised to react to Friday’s July Jobs Report as well.
Weekly Mortgage Applications were up again last week, although only slightly as the rise was 0.2% for the week ending July 27th. Refinances are once again driving the mortgage application train, now accounting for 81.2% of all transactions. Purchases fell 2.1% for the week.
Since the QE3 discussion has been at the center of many economic conversations recently, it’s appropriate that we received Wednesday’s Fed Statement which indicated that economic conditions will warrant the Fed to keep rates low through the end of 2014. According to the Fed, “The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” That statement reflects the majority position of the Fed, with their vote of 11-1 in favor of their monetary policy action which continued their trend line of thinking today.
Bond Market and Mortgage Rates have been relatively flat recently, although today we experienced a slight bond yield retreat following the Fed’s announcement. We could expect market volatility around tomorrow’s ECB announcement or Friday’s Jobs report.