Market News Update - Stock Market on a Roller Coaster

Am I the only person confused by the fact that on Wednesday the FOMC minutes basically stated that the Fed does not yet have a timetable on tapering the stimulus program because the job market is still weak; however, the Fed may have to consider tapering for other factors regardless of the job market…and on this news the stock market plummeted 130 points in a matter of minutes?

This is the same thing the Fed has been saying for months, yet investors reacted with panic as if it was going to happen immediately.  Then to add to the craziness, the stock market closed on Thursday near record highs once again.  Absolutely nothing changed from Wednesday to Thursday, but the market reacted as if the Fed made an announcement of something brand new. 

Further irony to the stock market reaction is that Janet Yellen, the heir to the Fed throne, has indicated that she sees absolutely no need to rush to change the Fed stimulus program.  Employment and economic weakness show little sign of any type of positive change and tapering would make it worse.

Mortgage rates for the prior week were little changed; however, this week we did see a jump on Thursday when the bond market momentarily panicked about the Fed’s language regarding stimulus tapering.  The Mortgage Bankers Association reported that applications for purchases jumped 6% in the prior week.  This is a welcome report because it breaks the run of purchase declines happening over the last few weeks.  Refinances continued to decline dropping 7%.

As I have been writing for the last few weeks, housing appears to be slowing.  Existing home sales were down 3.2 percent in October to a 5.12 million annual sales rate. This is the 3rd month in a row displaying weakness in the market.  Single-family home sales declined 4.1 percent following a 1.5 percent decline in September.  The data shows that declines are broad based across the country; however, the West fell the most at 7.1%.  The national supply for existing homes is down for a 3rd straight month, at 2.13 million units for sale.

Sorry, but I have to go back to my first point of today’s newsletter.  The weak housing report was released at 8:30AM on Wednesday.  The FOMC minutes that created momentary market panic were released at 2:00PM the same day.

Does anyone believe that the Fed is going to pull back on tapering while the housing market has been showing signs of weakness, not only in this latest report, but by many reports over the last few months?

Next week’s market moving reports are:

·        Monday November 25^th – Pending Home Sales

·        Tuesday November 26^th – Housing Starts, FHFA House Price Index and S&P Case-Shiller HPI

·        Wednesday November 27^th - MBA Purchase Applications and First Time Jobless Claims

·        Thursday November 28^th – Thanksgiving Holiday, All Markets Closed

I appreciate your business and look forward to talking to you soon! Have a great day!!!

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

BRE Lic # 01520422
NMLS # 214851   

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