Quiet Week May Be the Canary in the Coalmine

by Timothy S. O’Neil, SVP, Trust Investment Officer CFP®, CTFA

This will be a fairly quiet week for economic news.  Many of the announcements, like Housing Starts, will focus on the housing market, and the news is expected to be somewhat mixed.

Herring Bank, Housing Starts, Soft economy, Economic news, Wealth Management, Financial news.

Could softening Housing Starts numbers this week show signs of an economy that is still not fully recovered?

Housing starts are expected to decline from the previous month, but that reading was perhaps artificially high due to mild weather in February.  A number due out in the second half of the week, leading indicators on Thursday, could possibly cast a pall on the markets if it grows markedly slower than it had in the previous month.  Expectations of a cooling in the already pokey rate of growth of the U. S. economy is evident in the decreased yield on the bellwether 10-year U. S. Treasury note, which has sunk to 2.23% from a recent high of 2.60%.  Interest rates reflect, among other things, the demand for money; a slow economy generally means low demand and a reduced price for money, or interest rate.  This could also lead the Federal Reserve to postpone its next increase in overnight interest rates, and affect corporate profits down the road as well.  So even a slow week for news can be interesting.

SPOTLIGHT ON…mortgage applications.

Household formation is the backbone of the economy, with all kinds of different industries selling products and services to homeowners.  Applications, either for new mortgages or refinanced mortgages, are a way to track the pace of this activity.  Refinances are important in that they are ordinarily taken in order to lower monthly payments, thereby freeing up income to be devoted to other purposes.  While the numbers can be volatile from week to week, they can provide information about the strength of the housing market that investors can use.

ECONOMIC INDICATORS ANNOUNCED THIS WEEK

MONDAY

  • National Association of Home Builders Housing Market Index
    • Previous, March:                                     71
    • Expected, April:                                       70

TUESDAY

  • Housing Starts (seasonally adjusted annualized rate, in millions)
    • Previous (February):                                1.288
    • Expected (March):                                   1.262
  • Building Permits (seasonally adjusted annualized rate, in millions
    • Previous (February):                                 1.213
    • Expected (March):                                   1.250
  • Industrial Production
    • Previous (February):                                 unchanged
    • Expected (March):                                   +0.4%
  • Manufacturing
    • Previous (February):                                 +0.5%
    • Expected (March):                                   +0.3%
  • Capacity Utilization
    • Previous (February):                                 75.4%
    • Expected (March):                                   76.0%

WEDNESDAY

  • Mortgage Bankers’ Association Mortgage Applications
    • Purchases, previous:                                                            +3.0%
    • Refinances, previous:                                                       unchanged
  • Energy Information Administration (EIA) Petroleum Status Report (in millions of barrels)
    • Crude oil inventories (change for wk ended 4/14):        -2.2
    • Gasoline (change for wk ended 4/14):                              -3.0
    • Distillates (change for wk ended 4/14):                            -2.2

THURSDAY

  • Initial Unemployment Claims
    • Previous (week ended 3/25):                    234,000
    • Expected (week ended 4/8):                     244,000
  • Leading Indicators
    • Previous (February):                                       +0.6%
    • Expected (March):                                           +0.2%
  • EIA Natural Gas Report (in billions of cubic feet)
    • Previous (change for week ended 4/14):    +10

FRIDAY

  • Purchasing Managers’ Index (PMI) Manufacturing Flash
    • Previous (March final):                                     53.4
    • Expected (April “flash” or preliminary):       53.6
  • Purchasing Managers’ Index (PMI) Services Flash
    • Previous (March final):                                     52.9
    • Expected (April “flash” or preliminary):       53.1                                                                                                       (Note: PMI readings above 50 indicate an expanding economy)
  • Existing Home Sales (seasonally adjusted annualized rate, in millions)
    • Previous (February):                                         5.48
    • Expected (March):                                             5.605
  • Baker-Hughes Rig Count
    • NA rig count (previous, wk ended 4/14):                965
    • U.S. rig count (previous, wk ended 4/14):              847
    • GoM rig count (previous, wk ended 4/14):               21
    • Canada rig count (previous, wk ended 4/14):         118

Source: Wall Street Journal Market Data Center       Not FDIC Insured—May Lose Value—No Bank Guarantee

For Additional Information, Contact Herring Bank’s Wealth Management Team @ (806) 242-3739