Economic update for the week ending July 27, 2019
U.S. Economy slowed in second quarter – The Commerce Department reported that the Gross Domestic Product, the broadest measure of goods and services produced, rose at a 2.1% annual rate in the second quarter. That was down significantly from 3.1% in the first quarter, but above some analysts expectations who forecasted that tariffs and trade concerns may drag the GDP too as low as a 1.8% annual increase in Q2. Investors who are awaiting a possible rate cut from the Federal Reserve actually pushed up stock prices, as this report increases the likelihood of a rate cut to stimulate the economy.
Stocks higher this week – Although the second quarter GDP dropped a full percentage point to a 2.1% annual growth rate in the second quarter, down from a 3.1% growth rate in the first quarter, stocks gained ground. That was because investors feel slower growth increases the likelihood of a rate cut by the Fed, which will reduce borrowing costs to companies. Companies reporting corporate earnings have been strong in early reporting. Consumer spending also increased 4.3% in the second quarter which is very strong. The Dow Jones Industrial Average closed the week at 27,192.45, up 0.1% from 27,154.20 last week. It’s up 16.4% year to date. The S&P 500 closed the week at 3,025.86, up 1.7% from 2,976.61 last week. It is up 20.7% year to date. The NASDAQ closed the week at 8,33.21, up 2.3% from 8,146.49 last week. The NASDAQ is up 25.5% year to date.
Treasury Bond Yields – Bond yields dropped this week. The 10-year treasury bond closed the week yielding 2.08%, almost unchanged from 2.05% last week. The 30-year treasury bond yield ended the week at 2.59%, unchanged from 2.57% last week. We watch treasury bond yields because mortgage rates often follow bond yields.
Mortgage rates lower this week – The July 25, 2019 Freddie Mac Primary Mortgage Survey showed mortgage rates for the most popular loan products as follows: The 30-year fixed mortgage rate average was 3.75%, down from 3.81% last week. The 15-year fixed was 3.18%, down from 3.23% last week. The 5-year ARM was 3.47%, almost unchanged from 3.48% last week.
U.S. existing home sales numbers decline in June, as prices continue to rise – The National Association of Realtors reported that total existing home sales which includes closed sales of single family homes, condominiums, townhomes, and co-ops dropped 1.7% month over month in June from May, to a seasonally adjusted annual rate of 5.27 million sales in June. That is down 2.2% from 5.39 million annual sales rate last June. The median price paid for a home was 4.3% higher than one year ago. That marked the 88th straight month of year over year increases in the median price. The unsold inventory index stood at a 4.4 month supply of homes for sale, up slightly from a 4.3 month supply one year ago.
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