Volume 25, Number 3 Economic Highlights for the Week Ending January 18, 2019

MONDAY, January 14th
Stocks pulled back a bit Monday after a strong start in the new year. The Dow slipped 0.4% to 23,909 while the NASDAQ tumbled 0.9% to 6905. Oil prices slipped a dollar from last week’s rebound but maintain a perch over $50 a barrel. Bond prices turned lower, raising corresponding yields; the yield on the benchmark 10-year note rose to 2.71% from 2.69%.
TUESDAY, January 15th
Wholesale inflation remains subdued. The producer price index fell 0.2% in December, reflecting declines in global oil prices last month. Energy prices fell 5.4% in December following a 5.0% drop in November. Excluding both food and energy, prices were still soft with the core PPI falling 0.1% on the month. These data are not showing building inflationary pressures giving plenty of leeway for the Fed to hold steady on rates for a while.
WEDNESDAY, January 16th
The MBA mortgage application index jumped higher for the second week in a row, up 13.5% for the week ending January 11. The purchase index was up 9.1% last week as the refinance index surged 18.7%. Purchase applications are up 11% from the same week last year. Lower rates are supporting more robust mortgage application activity, though contract mortgage rates were little changed last week. The average 30-year fixed rate for conforming loans remained unchanged at 4.74%.
In another hopeful sign for the housing market, the NAHB housing market index rose 2 points to 58 in January. The gain and the level of the index suggest steady homebuilder optimism. Builders gave higher ratings for both present sales and sales six months from now, at a strong 63 and 64 respectively while foot traffic through model home increased a point to a still weak level of 44. This report bodes well for new home sales and construction it what is looking to be a modest 2019 rebound in the housing market.
The Fed's round up of activity in the twelve Federal Reserve Banking Districts known as the beige book indicated that economic activity increased in most all areas in December and early January. This report was prepared for the FOMC meeting at the end of this month. Modest to moderate growth was reported in retail sales, manufacturing the labor market. Wage growth remained flat as did housing during the period. Auto sales and energy slowed. Reports from the districts were generally optimistic but concerns about financial market volatility, rising rates, trade tariffs and political uncertainty tempered expectations.
Retail sales results delayed due to government shutdown.
THURSDAY, January 17th
Jobless claims fell 3k to 213k for the week ending January 12. Claims declined for the second week in a row despite elevated claims from furloughed Federal workers. The four-week moving average also declined, falling by 1k to 220,750. This is the sample week for the January employment report and when compared to December indicate that January should be another month of strong job creation.
Housing starts data delayed due to government shutdown.
FRIDAY, January 18th

Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 24706.35 23995.95 +710.40 or +2.96%
NASDAQ 7157.23 6971.48 +185.75 or +2.66%

In the holiday-shortened week ahead, the economic indicators are mostly from the housing sector with existing home sales on Tuesday and the FHFA purchase only house price index. New home sales and housing starts are tentatively scheduled for release on Friday.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 5.50 5.00 4.50
Fed Discount 3.00 2.50 2.00
Fed Funds 2.40 1.91 1.42
11th District COF 1.060 0.885 0.746
10-Year Note 2.78 2.86 2.59
30-Year Treasury Bond 3.10 2.98 2.87
30-Yr Fixed (FHLMC) 4.45 4.52 4.04
15-Yr Fixed (FHLMC) 3.88 4.00 3.49
6-Mo Libor (FNMA) 2.87563 2.50125 1.83707

Sources: IBC's Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
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