We’ve been very busy over the last couple weeks. Many of our clients are taking advantage of the incredible prices and low interest rates. Here’s a great market update provided by Austin Andruss, a mortgage broker partner of ours.
Good earnings reports from financial companies continued last week as Bank of America reported earnings that were much better than expectations. The company also said it earned more in the first quarter of 2009 than through all of 2008, largely a result of enormous refinancing activity. In addition, Treasury Secretary Tim Geithner said that most banks are well capitalized, and there are signs that credit market conditions are improving, which is definitely something to be optimistic about. However, as earnings season marched on, there were also some weak reports, including clinkers from The Bank of New York, Caterpillar, Dupont, Coca-Cola, Merck and United Technologies.
On the housing front, New Home Sales came out slightly better than expected, and it was especially good to see that the inventory number continues to fall – now at a 10.7 month supply, compared with February’s 11.2 months. Existing Home Sales came in slightly below market estimates – and while the report showed that Existing Home inventory in March fell by a modest 1.6%, at the current sales pace it would take an estimated 9.8 months to sell that inventory of properties, slightly longer than February’s 9.7 month reading. The path back to economic recovery will go through housing, and these reports will be important to watch in the months ahead.
In other news, Initial Jobless Claims were reported in-line with expectations. Initial Jobless Claims are a leading indicator and last week’s number does not yet suggest that the employment market is starting to improve. And March’s Durable Goods Orders marked the 7th negative reading in the last 8 months, as tighter credit and lack of business investment is continuing to fuel these negative numbers. However, it will be interesting to see how these numbers change with lending abilities now freed up following the recent relaxation of mark-to-market accounting rules, which will in turn make it easier for businesses and consumers to buy and spend.
There are several important reports and events to look for this week, and whether they will lean towards optimism or pessimism remains to be seen. On Tuesday the Consumer Confidence Report will show us if consumers are feeling their own glass is half full or half empty, while on Wednesday we will get a read on the economy with the Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. Also this week, we have the Fed’s next regularly scheduled Federal Open Market Committee meeting, followed by their Policy Statement and Interest Rate Decision coming on Wednesday afternoon. It will be important to see if the Fed has a positive or negative read on the economy, and if they comment on any of the recent whispers of inflation. And speaking of the Fed and inflation, the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) index found within the Personal Income Report, will be released on Thursday.