FEDERAL RESERVE: UNWINDING WILL BE GRADUAL
Last Wednesday, the country’s central bank detailed how it would shrink its mammoth balance sheet. During the fourth quarter, the Fed will unload $10 billion of maturing bonds per month; in each subsequent quarter, the monthly runoff will increase by $10 billion until reaching a limit of $50 billion. Fed chair Janet Yellen said that this schedule is set in stone, barring a “sufficiently great” economic threat. The Fed made no interest rate move last week, but 12 of 16 Fed officials do project a hike before 2017 ends.1
HOME SALES RETREAT AGAIN
In August, existing home sales fell for the fourth time in five months. Resales decreased 1.7% to a seasonally adjusted annual pace of 5.35 million, a 12-month low, according to the National Association of Realtors. Two factors hindered would-be buyers: a median house price of $253,500 and a 2.1% monthly reduction in inventory (the supply of homes for sale was 6.5% greater in August 2016).2
BUILDING PERMITS UP 5.7% IN AUGUST
This good news was countered by last month’s 0.8% reduction in groundbreaking. The Census Bureau’s report on August construction activity showed the rate of issuance for permits 8.3% above where it was a year earlier; the pace of starts was 1.4% improved. Starts for single-family homes were up 17.1% in 12 months.3
A MIXED WEEK FOR EQUITIES
Leading the way among the three major indices last week, the Dow Jones Industrial Average rose 0.36% in five days to 22,349.59. The S&P 500 made a smaller advance of 0.08% to 2,502.22. The Nasdaq Composite took a weekly loss of 0.33%, settling Friday at 6,426.92.4
- On Monday, Red Hat reports quarterly results.
- August new home sales numbers, the latest S&P/Case-Shiller home price index, the September Conference Board consumer confidence index, and earnings from Cintas, Darden Restaurants, Micron Technology, and Nike all arrive on Tuesday.
- Earnings announcements from Jabil Circuit, Pier 1 Imports, Thor Industries, and Worthington Industries complement reports on August durable goods orders and pending home sales, Wednesday.
- Thursday, the federal government’s second estimate of Q2 GDP and a new initial jobless claims report appear; also, Accenture, Blackberry, Conagra Brands, KB Home, and Rite Aid present earnings.
- The August personal spending report, the Federal Reserve’s August PCE price index, and the final September University of Michigan consumer sentiment index surface Friday.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||9/22 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.42%||0.08%||-0.71%||2.31%|
Sources: wsj.com, bigcharts.com, treasury.gov – 9/22/174,5,6,7
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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1 – nytimes.com/2017/09/20/business/economy/fed-bond-buying.html [9/20/17]
2 – marketwatch.com/story/existing-home-sales-fall-in-august-for-the-fourth-time-in-five-months-2017-09-20 [9/20/17]
3 – forbes.com/sites/samanthasharf/2017/09/19/u-s-housing-starts-slipped-permits-rose-in-august/ [9/19/17]
4 – markets.wsj.com/us [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F22%2F16&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F21%2F12&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]
5 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F21%2F07&x=0&y=0 [9/22/17]
6 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/22/17]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/22/17]