Capital Markets Update

By Louis S. Barnes                                   Friday, November 7, 2014

Mortgage interest rates were mostly flat on the week as economic data continues to be mixed. Economic data stronger than expected included the October ISM Manufacturing Index, weekly jobless claims, Q3 Productivity, and October unemployment. The four week moving average of jobless claims fell to its lowest level in 14 years. Unemployment fell to 5.8% but the labor participation rate is still low at 62.8%. Economic data weaker than expected included September Construction Spending, the September Trade Deficit, September Factory Orders, the October ISM Services Sector Index, October non-farm and private payrolls, and October Average Hourly Earnings. In Europe, the European Central Bank left interest rates unchanged and did not announce additional stimulus. The European Commission cut its growth forecast for the EU to 0.8% this year and to 1.1% in 2015. In China, the Purchasing Managers Index was weaker at 50.8 versus 51.2 expected. Economic weakness in Europe, China, and much of Latin America along with a strong Dollar will likely be a drag on U.S. economic growth as exports slow.

The Dow Jones Industrial Average is currently at 17,552, up over 160 points on the week. The crude oil spot price is currently at $78.78 per barrel, down almost $2 per barrel on the week. The Dollar strengthened versus the Yen and Euro on the week.

Next week look toward Thursday’s Jobless Claims and Friday’s Retail Sales and Consumer Sentiment Index as potential market moving events. Bond markets are closed on Tuesday for Veterans Day.