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Lanning Financial Inc.
For the week of July 11, 2011 |
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Lanning Financial Inc.
636 Fourth Street
San Francisco, CA 94107
415.354.5699 ph. & private fax
Jessica Lanning and Lanning Financial provide mortgage services and financial strategies that bring focus and perspective to your individual financial needs. |
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Last Week in Review... | |
"HE THAT SPEAKS MUCH, IS MUCH MISTAKEN." Those words by Benjamin Franklin rang true last week, after a report earlier in the week had the markets buzzing about the potential for a strong Jobs Report... only to have those expectations crash at week's end. Here's what happened and how it impacted Bonds and home loan rates.
Major shocker. According to the Labor Department's "Non-Farm Payroll" Jobs Report, only 18,000 jobs were gained during the month of June. That number was significantly below the recently upwardly revised gain of 125,000 new jobs that were expected, and showed employers hiring the fewest number of workers in 9 months.
Unemployment ticks up. The Unemployment Rate was also a disappointment, rising from 9.1% to 9.2%. While this facet of the report isn't unexpected - as the Unemployment Rate can rise as more people re-enter the labor market in "job seeker" mode - the overall disappointing report re-ignites fears that the economic recovery is slowing and remains a bit stagnant.
Is there a silver lining? There was one somewhat bright spot in the Jobs Report. All of the job gains came from the private sector, with government agencies being the ones losing jobs as they deal with budget pressures. So while gains have slowed, the growth that exists is at least coming from the private sector.
Why were expectations so high? Just one day before the Jobs Report was released, the markets saw the ADP Employment Report, which was far better than anyone expected. Instead of the 60,000 job gains that were expected, the report showed 157,000 jobs added in June. That pleasant surprise boosted Stocks... and also boosted expectations that the Jobs Report would come in better than expected too.
In addition, the weekly Initial Jobless Claims Report also gave the markets a positive outlook on employment, as the report showed a decrease in the number of new unemployment claims. Although the number was still above the important 400,000 mark, it indicated that the previous week's higher number could have been an "anomaly" week - with the July 4th holiday slowing down the count for many states as well as Minnesota's state government shutting down and forcing several thousand state employees to file claims themselves.
Speaking of Minnesota, the state may serve as a warning. In the wake of the state government shutdown, many political and market experts are looking to Minnesota as a glimpse of what could happen at the federal level if Congress and the White House can't reach an agreement. The political climate in the state has mirrored what is happening on the federal level, as the battle continues over a budget deal. And just last week, Fitch Ratings has downgraded Minnesota's debt rating, which means the State will need to pay higher interest rates to investors due to increased risk. No matter how you look at the situation, it's not a pretty picture of what happens when compromise isn't reached.
Overall, the news last week led to volatility both in expectations and in market movement. In the end, Bonds made some strong gains at the end of the week to help home loan rates finish strong. That means rates are still near historic lows and represent a great opportunity. Call or email to see how the situation may benefit you. | |
| Forecast For The Week... |
Get ready for another busy week... and possible volatility. This week's inflation reports and upcoming auctions will determine if the rally continues.
- The week starts with the Balance of Trade report on Tuesday and the release of the Fed's FOMC Meeting Minutes on Wednesday.
- The big news hits toward the end of the week, when inflation will be in the spotlight. The Producer Price Index (PPI) will be released on Thursday and the Consumer Price Index (CPI) is due on Friday. If the inflation readings are hot, the rally inspired by last week's Jobs Report could be short lived. I will monitor this issue closely to see how it may impact you or your home loan plans.
- Retail sales will also be released on Thursday. This is the most timely indicator of broad consumer spending patterns.
- Thursday we'll also see the weekly Initial and Continuing Jobless Claims Report. After last week's mixed employment reports, the markets will be watching this as closely as ever.
- We'll see a triple dose of manufacturing news this week. The Empire State Index, Capacity Utilization, and Industrial Production are all on tap Friday.
- Finally, the Consumer Sentiment Index is due out on Friday. This index is important because the level of consumer sentiment is directly related to the strength of consumer spending, which accounts for two-thirds of the economy.
In addition to those reports, Bonds and home loan rates may be impacted by the Treasury Auctions this week. Remember, the Fed buying (known as the second round of Quantitative Easing or QE2) is over - so this week's auctions will be interesting and may stir up the markets.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.
As you can see in the chart below, Bonds and home loan rates experienced a volatile week but finished strong after disappointing employment news pressured Stocks. I'll be watching closely to see if the slower economic recovery continues... and how this week's news impacts home loan rates.
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Chart: Fannie Mae 4.0% Mortgage Bond (Friday, July 08, 2011) | |
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| The Mortgage Market View... | |
Mileage Rates Go Up Due to High Gas Prices
If you drive a car, truck or van for work, you'll be able to get an additional 4.5 cents per mile. Beginning July 1, here are the standard mileage rates for the remainder of 2011:
·Businesses = 55.5 cents per mile driven (up from 51 cents through June)
·Medical or moving = 23.5 cents per mile driven (up from 19 cents through June)
The Internal Revenue Service (IRS) increased the mileage rate in response to the recent high gas prices. These mileage rates are used to calculate deductible costs for driving an automobile for business, medical and moving purposes. NOTE: The rate for driving that is related to charities remains unchanged at 14 cents per mile, since that rate is set by a statute. You can read the official release in the IRS™ Announcement 2011-40.
Make Sure You Qualify
Before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
Additional Option
Although the IRS provides the standard mileage rate for ease and convenience, you're not required to use it. If you prefer, you can calculate the actual costs of using your vehicle instead of using the standard mileage rates.
Remember, if you have questions are concerns, talk to a tax consultant or accountant to discuss your options and unique situation. | |
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| RECOMMEND YOUR FAVORITE PROFESSIONALS... | | Jessica is looking to expand her business network and is looking for outstanding professionals in the following fields:
· Tax Attorney
· Nutritionist
· Relocation/Moving Specialist
· Marketing Specialist
If you know someone who is really great, please connect that person to me! Thank you! | |
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| This Week's Economic Indicator Calendar... | |
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of July 11 - July 15, 2011
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors. As your trusted advisor, I am sending you Lanning's LiveWire because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you. In the unlikely event that you no longer wish to receive these valuable market updates, please email: jlanning@jessicalanning.com If you prefer to send your removal request by mail, the address is: Jessica Lanning, CMC Lanning Financial Inc 636 Fourth Street San Francisco, CA 94107 Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Success Source, LLC does not grant to you a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose. |
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Jessica Lanning
Lanning Financial Inc.
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