NEWS YOU CAN USE

>> Market Update

INFO THAT HITS US WHERE WE LIVE Thursday the Wall Street Journal reported Q3 home sales at an annual rate of 5.3 million units. That was an 11.4% gain over Q2's 4.76 million units. Experts put much of the rising sales to the tax credit of up to $8,000 for first-time homebuyers. A week ago Friday, the President signed a bill extending that tax credit well into next year and expanding it to first-time buyers with higher incomes as well as to existing homeowners, with a $6,500 limit. National Association of Realtors chief economist Lawrence Yun feels "rising sales from the expanded tax credit should stabilize home prices by next spring."

That same tax credit bill also created a new tax break for businesses. The bill lets large firms claim cash refunds on taxes they paid going back five years, to offset current losses. The carry-back period had previously been just two years. Experts estimate this could improve the cash positions of big home builders by hundreds of millions of dollars to further help the recovery. Luxury home builder Toll Brothers is doing just fine already. Tuesday they announced their fiscal Q4 had a 42% jump in contracts over last year. And the value of those contracts was 62% higher than a year ago.

Finally, the NAR's report on home prices said most U.S. cities saw gains in the median price of single-family homes for Q3--the second quarter in a row of price gains. Prices were still down from Q3 a year ago, but the pace of the decline has been slowing. Many experts feel the shrinking supply of unsold homes suggests the housing market is edging closer to price stabilization. Even foreclosure fillings fell in October for the third straight month.

>> Review of Last Week

HOLDING AT 10,000... We've now had two weeks in a row in which investors were confident enough in the recovering economy to keep the Dow Jones Industrial average north of that magic 10,000 number. The S&P 500, a broader indicator of business health, was also up nicely for the week, as well as the tech-heavy Nasdaq, which posted the biggest jump of all.

The week got off to a great start on the news that finance ministers and central bankers from 20 major world economies--the "G-20"--will keep their financial support coming until the global recovery is certain. Investors also liked the news that Hewlett-Packard made a deal to buy 3Com to expand its networking business and increase its position in China. Wal-Mart reported a better-than-expected 3.2% boost in Q3 profits and an improved outlook for the year, although it gave a cautious forecast for Q4.

The Trade Balance showed exports UP five months in a row since bottoming in April. This is a 24.1% annual growth rate, with imports up at a 32.6% rate. The discrepancy makes for a deficit, but it's billions smaller than last year. The reality is, the spike in imports and continued export gains signal to many that the economy is getting better. Meanwhile, initial jobless claims fell again last week to 502,000 and the four-week moving average was the lowest in almost a year.

For the week, the Dow finished UP 2.5%, to 10270.47; the S&P 500 was also UP 2.3%, to 1093.48; while the Nasdaq went UP 2.6%, to 2167.88.

It was another week of stocks moving up AND bond prices doing well too. This was helped by the Fed stepping in with their buying progra. The FNMA 30-year 4.5% bond we watch ended up from the previous week's close, finishing at $101.75. Not surprisingly, mortgage rates fell again last week, with Freddie Mac reporting long-term rates at the lowest levels in five weeks!

>> This Week’s Forecast

PLENTY TO PONDER... The week begins with the October Retail Sales report giving us another look at the consumer mindset. The Producer Price Index looka at the inflation situation for business but Wednesday's Consumer Price Index is the inflation reading the Fed looks at to see if they need to raise rates. On Wednesday we also get Housing Starts and Building Permits. Friday's Philadelphia Fed Index is another important measure of manufacturing.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of November 16 – November 20

Date	Time (ET)	Release	For	Consensus	Prior	Impact
M Nov 16	08:30	Retail Sales	Oct	0.9%	–1.5%	HIGH
M Nov 16	08:30	Retail Sales ex-auto	Oct	0.4%	0.5%	HIGH
M Nov 16	08:30	NY Empire State Manufacturing Index	Nov	30.00	34.57	Moderate
M Nov 16	10:00	Business Inventories	Sep	–0.7%	–1.5%	Moderate
Tu Nov 17	08:30	Producer Price Index (PPI)	Oct	0.5%	–0.6%	Moderate
Tu Nov 17	08:30	Core PPI	Oct	0.1%	–0.1%	Moderate
Tu Nov 17	09:15	Industrial Production	Oct	0.4%	0.7%	Moderate
Tu Nov 17	09:15	Capacity Utilization	Oct	70.8%	70.5%	Moderate
W Nov 18	08:30	Housing Starts	Oct	600K	590K	Moderate
W Nov 18	08:30	Building Permits	Oct	580K	573K	Moderate
W Nov 18	08:30	Consumer Price Index (CPI)	Oct	0.2%	0.2%	HIGH
W Nov 18	08:30	Core CPI	Oct	0.1%	0.2%	HIGH
W Nov 18	10:30	Crude Inventories	11/13	NA	1.76M	Moderate
Th Nov 19	08:30	Initial Unemployment Claims	11/14	504K	502K	Moderate
Th Nov 19	08:30	Continuing Unemployment Claims	11/13	5.600M	5.631M	Moderate
Th Nov 19	11:00	Leading Economic Indicators (LEI)	Oct	0.4%	1.0%	Moderate
Th Nov 19	08:30	Philadelphia Fed Index	Nov	12.0	11.5	HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months.The Fed continues to maintain they will keep rates low until the economic recovery is on solid ground. Experts expect the present rate situation to continue a few more months. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:	Consensus
Dec 15	0%–0.25%
Jan 27	0%–0.25%
Mar 16	0%–0.25%

Probability of change from current policy:

After FOMC meeting on:	Consensus
Dec 15	1%
Jan 27	3%
Mar 16	9%

Permalink

Russ Lyon | Sotheby's International Realty Flagstaff
1750 S Woodlands Village Blvd.. Ste 125 • Flagstaff, AZCoconino 86001
Phone: 928.853.4289 • Email Gregg@GreggMunson.com
Fax: 888.241.6446