Economic Update 09/23/13

NO TAPERING YET…BUT COULD IT HAPPEN SOON?

The DJIA hit an all-time high Wednesday after the Federal Reserve decided not to reduce its $85 billion monthly stimulus effort. Friday, the index lost 185 points on the heels of comments from St. Louis Fed President James Bullard (who said that QE3 could be tapered next month) and Kansas City Fed President Esther George (who said that the decision not to taper created confusion in the markets). So investors wonder: is an “Octaper” ahead? This week is data-heavy, and investors will be keeping an eye on federal budget talks in addition to any comments from Fed officials. The September FOMC minutes come out on October 9; the next Fed policy announcement occurs on October 30.

RISING INTEREST RATES PROMPT HOMEBUYING

Existing home sales hit a six-year peak in August, rising 1.7% for the month in the estimate of the National Association of Realtors. The big reason? Buyers ran to lock in interest rates on mortgages before they increased further. The median price of an existing home in August was $212,100 – 14.7% higher than in August 2012. Housing starts rose 0.9% in August, according to the Commerce Department.

CPI BARELY BUDGES IN AUGUST

Consumer inflation (as measured by the Consumer Price Index) ticked up 0.1% last month. The core CPI also rose 0.1%. Economists surveyed by Briefing.com had expected 0.2% August gains for both the headline and core indices.

STOCKS ADVANCE FOR THIRD CONSECUTIVE WEEK

A bad Friday still left the Dow at 15,451.09 at the end of the week. Across a volatile five days, it rose 0.49%; the S&P 500 (+1.30% to 1,709.91) and NASDAQ (+1.41% to 3,774.73) both outperformed it last week.

THIS WEEK: On Monday, Goldman Sachs, Nike and Visa join the DJIA (replacing Alcoa, Bank of America and Hewlett-Packard); Red Hat announces Q2 results. July’s S&P/Case-Shiller home price index and FHFA home price index appear Tuesday, along with the Conference Board’s September consumer confidence survey and earnings from Lennar, CarMax and KBHome. Wednesday, the Census Bureau issues August new home sales figures, the August durable goods orders report arrives, and Bed Bath & Beyond and AutoZone report earnings. Thursday brings the last estimate of Q2 GDP from the federal government, NAR’s report on August pending home sales, new initial jobless claims numbers and Q2 results from Accenture and Nike. Friday offers the University of Michigan’s final September consumer sentiment index, the August consumer spending numbers and earnings from Blackberry.