If you have to guess – is consumer confidence up or down?  Syd Leibovitch provides the answers about all things economic in this week’s market update.
Stocks slightly higher for the week – Fears of higher interest rates were tempered after a disappointing retail sales report on Wednesday and a disappointing consumer confidence survey which was released on Friday.  Early in the week stocks had suffered and bond interest rate yields had reached the highest levels in over a year before they began to drop after the reports showed that the economy was not bouncing back from a slow first quarter. Last year the economy bounced back very quickly in the second quarter after a harsh winter led to a poor first quarter. Experts had hoped that this year the economy would bounce back strongly as it did last year. That has not happened. Usually signs of slowing would cause the markets to drop, but right now interest rates are dominating investors’ concerns.  It is widely felt that the Federal Reserve, who has already stated they would began to rise rates this year because growth has been so strong,  may  leave rates unchanged for a longer period of time because the economy is beginning to show signs of slowing. The Dow Jones Industrial Average closed the week at 18,272.56, up from 18,191.11 last week. The Nasdaq closed at 5,048.29, also up from 5,003.55 last Friday. The S&P 500 closed at 2,122.73, slightly higher than last Friday’s close of 2,116.10..Bond yields were volatile this week   –  The 10 year U.S. Treasury Bond, which got as high as 2.30% early in the weekclosed the week at a 2.14% yield, almost unchanged from 2.16%  last week.  The 30 year U.S. Treasury Bond closed Friday yielding 2.93%, also unchanged from 2.90%  last Friday. The 30 year treasury yield reached 3.10% on Wednesday. Yields dropped considerably on Friday following a weak consumer confidence report.

Mortgage Rates  –  The 30 year fixed rate ended the week around 4.00% for loans up to $417,000, and around 4.25% for loans over $417,000.  The 15 year fixed rate loans are about 3.25% for loans up to $417,000, and around 3.50% for loans over $417,000. The 5 Year-ARM rates are around 3.00%.  1 Year-ARM mortgages are around 2.50%.  Last week’s Freddie Mac Primary Mortgage Survey showed rates as follows: 30 year fixed rates at 3.85%. 15 year fixed at 3.07%. 5/1 YR ARM at 2.89% and 1 YR ARM at 2.48%.

Consumer confidence drops in May – The University of Michigan Surveys of Consumers Confidence reported that confidence fell in early May as consumers became increasingly convinced that there would be no quick and robust rebound following the disappointing 1st quarter growth rate. Consumer confidence is followed by experts because so much of the economy is dependent on consumer spending. Lower confidence results in consumers pulling back and spending less.

Retail sales in April fall short of expectations – Retail sales in April excluding autos and gas rose just 0.2%, falling well below the 0.6% rise expected by analysts. Economists expected consumers to be bouncing back after a slow winter as weather improved.  That did not happen. They also expected consumers to take the money they saved on lower gas prices early in the year and spend it, which also did not materialize.

Have a great weekend!
Syd Leibovitch

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