Retail Sales Increased

The producer price index that tracks wholesale price inflation increased 0.8 percent in the month of November after seeing a rise of 0.4 percent for the month of October. Core prices, which do not include food and fuel, increased 0.3 percent for the month of November. The seasonally adjusted wholesale prices are up 3.5 percent for the year.

Retail sales increased 0.8 percent in the month of November after seeing a 1.7 percent rise in the month of October. This was the 5th month in a row showing gain. Economists had believed that there would be an increase in the month of November of 0.6 percent.

Total business inventories increased in the month of October to $1.42 trillion, which is the highest level seen since February of 2009. Total business sales increased 1.4 percent to $1.12 trillion in the month of October after seeing a 0.8 percent rise in the month of September.

Industrial production at the nation’s factories, mines, and utilities increased 0.4 percent in the month of November after seeing a 0.2 percent fell in the month of October. When compared to a year ago, industrial production is up 5.4 percent while capacity utilization increased to 75.2 percent in the month of November.

The construction of new apartments and single-family homes in the month of November increased 3.9 percent to a seasonally adjusted annual rate of 555,000 units. Single-family starts increased 6.9 percent, multifamily starts fell 9.1 percent and applications for new building permits decreased 4 percent to an annual rate of 530,000 units. New building permits is observed as an indicator of future activity.

The index of leading economic indicators, which is designed to predict economic activity in the next three to six months, increased 1.1 percent in the month of November being the largest gain in eight months.

First claims for unemployment benefits decreased by 3,000 to 420,000 for the week that ended on December 11, while continuing claims for the week that ended on December 4 increased by 22,000 to 4.14 million.

Economic Calendar reports upcoming
Existing home sales – December 22
New home sales – December 23

Consumer Credit Debt Increased

According to the ICSC-Goldman Sachs index for the week that ended on December 4, retail sales decreased 2.1 percent. On a year over year basis retailers enjoyed a sales increase of 2.6 percent.

Consumer credit debt increased in October by $3.38 billion for a total credit level of $2.4 trillion as reported by the Federal Reserve. In September, the gain of $2.1 billion was revised to a gain of $1.23 billion. Revolving debt that does include credit cards decreased by $5.64 billion while non-revolving debt like car loans increased by $9.02 billion.

According to the Mortgage Bankers Association the seasonally adjusted composite index of mortgage applications for the week that ended on December 3 decreased 0.3 percent, refinancing applications fell 1.4 percent, and purchase volume increased 1.8 percent.

Wholesaler’s inventories increased 1.9 percent for the month of October after seeing an increase of 2.1 percent for the month of September. Wholesale level sales increased 2.2 percent in the month of October after seeing a rise of 0.5 percent in the month of September. Economists had believed that inventories would have increased 0.8 percent in the month of October.

In the month of October, the trade deficit fell 13 percent to $38.7 billion from $44.6 billion in the month of September. Economists believed to see a trade deficit of $44.5 billion. Exports increased 3.2 percent to $158.7 billion while imports fell 0.5 percent to $197.4 billion.

The consumer sentiment index compiled by Reuters/University of Michigan showed an increase in the preliminary reading for December of 74.2 from 71.6 seen in November. The index hit a thirty-year low in November of 2008, which was 55.3.

First claims for unemployment benefits decreased by 17,000 to 421,000 for the week that ended on December 4, while continuing claims for the week that ended on November 27 decreased by 191,000 to 4.09 million.

Economic Calendar reports upcoming

Retail sales – December 14
Housing starts – December 16

Stocks

Thursday stocks were wavering after weekly unemployment claims decreased more than was expected and Japan reported its economy grew faster than was estimated.

The Dow Jones Industrial Average ($INDU) was down by 1.6 points, or less than 0.1%, at 11,371, while the S&P 500 ($INX) was up by 2.8 points, or 0.2%, at 1,231, and Nasdaq ($COMPX) was rising by 7 points, or 0.3%, to 2,616 at 10:14 a.m. ET.

The Labor Department reported first unemployment claims decreased by 17,000 to 421,000 during the week that ended on December 4 from 438,000 seen the previous week. Economists had believed claims would drop by 7,000, as reported by Briefing.com.

wholesale inventories according to the Department of Commerce rose 1.9 percent in the month of October after raising 2.1 percent in the month of September. The increase went beyond market expectations for growth of 0.7 percent.

The the nation’s economic growth rate was revised by the Japanese government for the 3rd quarter to 4.5 percent from 3.9 percent. Japan’s Nikkei increased 0.5 percent. Hong Kong’s Hang Seng added 0.3 percent.

The Bank of England left its lending rate at 0.5 percent, as expected. The FTSE in London was up by 0.3 percent, while the DAX in Frankfurt was off by 0.1 percent.

Dell (DELL) is in discussion to possibly buy Compellent Technologies (CML). Under this agreement, Dell would acquire the data storage company for $27.50 per share. Dell’s stock was up by 0.4 percent to $13.73 while Compellent’s stock was down 11 percent at $29.80.

Shares of Lululemon Athletica (LULU), the athletic-apparel retailer, were up 15 percent to $64.33 stating its third-quarter earnings soared 82 percent. Lululemon exceeded outlooks with per-share earnings of 20 cents a share on sales of $175.8 million.

Smithfield Foods (SFD), pork processor, shares were advancing 6.3 percent to $18.82 after the report of the second-quarter profit of 86 cents a share on higher pork prices and sales increased 11 percent to $3 billion. Analysts had believed a per-share profit of 56 cents on sales of $3.2 billion.

Shares of the Dutch chip equipment maker ASML (ASML) were going up 6.5 percent to $37.50 after the company forecast its fourth-quarter bookings would go beyound 2 billion euros ($2.66 billion) on strong demand for lithography equipment.

Crude oil for the month of January delivery rose by 15 cents at $88.43 a barrel. The most actively traded February gold contract was rising $1.10 at $1,384.30 an ounce.

The dollar was stronger against six currencies, with the dollar index up by 0.3 percent. The benchmark 10-year Treasury note was stronger by 7/32, weakening the yield to 3.246 percent.

Exposed $725 Million Mortgage Scam in California

Fraudulent delays in foreclosures on over 1400 properties in California due to three individuals, which resulted in losses of close to $725 million, which was due to the loss of interest payments that went back as far as three years. Federal authorities and the state of California are taking Irving Cohen and two of his associates to task for their foreclosure stalling tactics they used as well as the $550,000 in fees collected from homeowners in exchange for their services. Cohen along with his associates guaranteed homeowners they could delay foreclosure sales “indefinitely” and then collected high fees for performing these services. The foreclosure would be delayed as long as the homeowners were able to pay the fees, which were up to $1500 per month.

Cohen and his associates did this by gaining a 1/8 interest in the home on behalf of a “fictitious person”. At this time, Cohen could file bankruptcy on the behalf of the “fictitious person” and then stop the foreclosure using “automatic stay” which protects debtor’s properties when they file bankruptcy. Lending companies were bound to cancel foreclosure sales and wait on the bankruptcy petitions to be discharged, along with working with attorneys to assess and dismiss the fabricated bankruptcy filings. Cohen and his associates ran the scheme from 2006 until July of 2010. During the time of the scam, Cohen served jail time for a different fraud conviction in state court and the two associates ran the scam while he was in jail. One of the associates made use of the service and then started helping with operations in exchange for a waiver on the fees that were associated with the foreclosure delays.

Mortgage Rates Increase

Around the middle of November, a reminder that the government cannot control like it would like seemed to surface. An example of this, the Federal Reserve Board cannot control rates, it can only control short-term rates, but not long term rates. This may be something that many of have forgotten due to the fact that the Federal governments plan to purchase mortgages and Treasuries worked pretty good as a peak was seen during the financial crisis. The Federal government purchased these when the economy was wrecked and the markets accepted it without a hitch. Right now the markets are not as keen as accepting the Federal governments plan to purchase $600 billion in assets over the next few months as many are worried that this could cause inflation to rise. The scar from the Federal government comes shortly after the report of the lowest level of consumer inflation since 1957 was seen. It does come when the economy is beginning to show a turn around.

The main factor – Markets in the short run are often, this is the main reason you never predict the future of rates or the stock market. If the market believes that such a move by the Feds as lowering rates short term or buying assets to bring on inflation, long term rates can go up as a reaction. At this time, everyone is predicting low rates for quite a while to come. When rates went up in the middle of November it was a huge surprise. So remember, you cannot predict the future even with a crystal ball. The good news though or it may be bad news according to where you stand. Inflation is nonexistent. At this time, the economy is very slow and it will slow even more mainly due to the foreclosure epidemic. There is no reason for rate spikes in the short term. On the other hand, for those that believe the rates will stay low forever and put off buying a new home, may be crying as this can change without a moments notice.

Freddie Mac stated that for the week that ended on November, 30 year fixed rates were on average 4.39 percent, which is up 4.17 percent from the prior week. The average 15 year fixed rate increased to 3.76 percent, and adjustable rates were mixed with the average for one-year adjustables staying at 3.26 percent while 5-year adjustables increased to 3.40 percent. One year ago, 30 year fixed rates were seen at 4.83 percent. Frank Nothaft, vice president and chief economist of Freddie Mac stated, “Rates on 30-year fixed loans were up to the highest level since early August and rates on shorter-maturity loans rose as well, although by somewhat lesser amounts. Retail sales rose by nearly twice the consensus in October and represented the strongest gain since March. Moreover, consumer sentiment, as measured by the University of Michigan, ticked up in November to the highest level since June. The housing market is showing some potential gains as well. Although new construction on one-family homes dipped 1.1 percent in October, homebuilder confidence rose in November to the strongest level since June.”

Current Indices For Adjustable Rate Mortgages
Updated November 19, 2010
Index – 6 month Treasury Security
November – 0.19%
October –  0.18%
 
Index – 1 year Treasury Security
November – 0.26%
October –   0.23%
 
Index – 3 year Treasury Security
November – 0.77%
October –   0.57%
 
Index – 5 year Treasury Security
November – 1.51%
October –   1.18%
 
Index – 10 year Treasury Security
November – 2.90%
October –   2.54%
 
Index  – 12-month LIBOR
0.769% October
 
Index – 12-month MTA
0.330% October
 
Index – 11th District Cost of Funds
1.663% September
 
Index – Prime Rate
3.250% October