Markets rally over eco­nomic in­di­ca­tors show­ing strength

Austin American-Statesman - - BUSINESS - By Dave Liedtka Bloomberg News

U.S. stocks rose for a fourth day and the dol­lar strength­ened after data bol­stered op­ti­mism that the Amer­i­can economy is on firm foot­ing. Gaso­line spiked to the high­est in two years as Har­vey re­lent­lessly pounded the en­ergy-rich Gulf coast.

The S&P 500 in­dex pushed above its av­er­age price for the past 50 days, over­com­ing early weak­ness sparked by a Twit­ter post from Pres­i­dent Don­ald Trump on North Korea. Euro­pean stocks gained with Asian shares on op­ti­mism that the anx­i­ety after a mis­sile launch this week was re­ced­ing.

Trea­suries rose, while the green­back ad­vanced ver­sus most ma­jor peers.

“It doesn’t strike me that the mar­ket is ex­tremely ner­vous here,” said Michael An­tonelli, an in­sti­tu­tional eq­uity sales trader and man­ag­ing di­rec­tor at Robert W. Baird & Co. “I think as time goes on, these kind of tweets have less and less im­pact on the mar­ket.”

In­vestors fo­cused on data show­ing U.S. sec­ond-quar­ter growth reached the fastest pace in two years on stronger house­hold spend­ing and a big­ger gain in busi­ness in­vest­ment. A pri­vate re­port on pay­rolls in­di­cated ro­bust hir­ing this month two days be­fore gov­ern­ment jobs data will be scoured for clues on the tim­ing of the Fed­eral Re­serve’s next rate move.

The main moves in markets Wed­nes­day:

■ The S&P 500 in­dex rose 0.5 per­cent, the Nas­daq 100 in­dex jumped 1.1 per­cent and the Dow Jones in­dus­trial av­er­age edged 0.1 per­cent higher.

■ The U.K.’s FTSE 100 in­dex rose 0.4 per­cent, re­cov­er­ing from the big­gest drop in al­most three weeks on a clos­ing ba­sis.

■ Ger­many’s DAX in­dex gained 0.5 per­cent.

■ The euro dropped 0.7 per­cent to $1.1886, after touch­ing the strong­est in al­most three years on Tues­day.

■ The yield on 10-year Trea­suries rose one ba­sis point to 2.14 per­cent, while the twoyear note yield in­creased one ba­sis point to 1.33 per­cent. that growth over the past six months has av­er­aged 2.1 per­cent, the same mod­est pace seen for the re­cov­ery that be­gan in mid-2009.

Dur­ing last year’s pres­i­den­tial cam­paign, Don­ald Trump at­tacked the Obama ad­min­is­tra­tion’s eco­nomic record, pledg­ing to dou­ble GDP growth to 4 per­cent or bet­ter.

His first bud­get, sent to Congress ear­lier this year, projects growth rates will climb to a sus­tained an­nual rate of 3 per­cent, a goal that many pri­vate economists be­lieve pro­gram on a more sus­tain­able foot­ing.”

Re­verse-mort­gage loans are meant to help se­niors age 62 and older “age in place” by giv­ing them cash from the eq­uity in their homes. Bor­row­ers re­ceive a line of credit or a loan in a lump sum or in monthly pay­ments. They are al­lowed to de­fer pay­ments on the debt un­til they die, move away or do not meet loan obli­ga­tions, such as pay­ing prop­erty taxes and in­sur­ance.

A key change to the pro­gram will be how much in­sur­ance se­nior bor­row­ers will need to pay to HUD to ob­tain loans. They will be re­quired to pay a stan­dard 2 per­cent up­front in­sur­ance fee based on the max­i­mum amount they can bor­row on their home. Cur­rently, in­sur­ance pre­mi­ums range from 0.5 per­cent to 2.5 per­cent. The change will be off­set by a drop in an an­nual in­sur­ance rate of 0.5 per­cent, re­duced from 1.25 per­cent, of­fi­cials said.

After Oct. 2, se­nior bor­row­ers is too op­ti­mistic.

The non­par­ti­san Con­gres­sional Bud­get Of­fice sees growth av­er­ag­ing 1.9 per­cent over the next decade, a fore­cast much closer to es­ti­mates made by pri­vate economists.

Many economists had been fore­cast­ing growth in the cur­rent July-Septem­ber quar­ter would be around 3 per­cent. Some are now say­ing that the dev­as­ta­tion from Hur­ri­cane Har­vey could shave about a half-per­cent­age point off growth this quar­ter. How­ever, an­a­lysts be­lieve the pace of growth will bounce back once the re­build­ing be­gins and oil re­finer­ies get back to full pro­duc­tion, bring­ing down prices.

For the en­tire year, Mark also will face new lim­its on how much they can bor­row from their homes. Cur­rently, lim­its are based on in­ter­est rates and the age of a bor­rower. Now a 62-yearold with an in­ter­est rate of 5 per­cent for the loan would be able to ob­tain about 41 per­cent of the eq­uity in their prop­erty, down from 52 per­cent. An 82-year-old would be able to ac­cess 51 per­cent of the eq­uity, down from nearly 60 per­cent.

HUD of­fi­cials said the changes aren’t in­tended to off­set losses from ear­lier loans, but in­stead to help im­prove the in­sur­ance fund. Ev­ery re­verse-mort­gage loan is pro­jected to lose money, of­fi­cials said. A 2016 HUD ac­tu­ar­ial re­port shows that the re­verse-mort­gage pro­gram is ex­pected to bal­loon to neg­a­tive $12.5 bil­lion in 2023.

Hous­ing and con­sumer ad­vo­cates won­dered how the changes would af­fect a pro­gram that has in­sured more than 1 mil­lion bor­row­ers since its in­cep­tion.

Ira Rhein­gold, ex­ec­u­tive di­rec­tor of the Na­tional As­so­ci­a­tion of Con­sumer Ad­vo­cates, Zandi, chief econ­o­mist at Moody’s An­a­lyt­ics, is fore­cast­ing growth of 2.1 per­cent. That would mark an im­prove­ment over last year when the economy grew a mea­ger 1.5 per­cent, the poor­est show­ing since 2009 when GDP shrank by 2.9 per­cent.

Zandi is fore­cast­ing that growth in 2018 will be an even stronger 2.8 per­cent. But he said 0.4 per­cent­age point of that fore­cast re­flects an as­sump­tion that the Trump ad­min­is­tra­tion will win a tax cut pack­age that will take ef­fect in early 2018. The economy will also be boosted by higher spend­ing on the mil­i­tary and in­fra­struc­ture projects, he said. wor­ries that needy se­niors will find it harder to get help. He said HUD is pun­ish­ing low-in­come home­own­ers for prob­lems that were ag­gra­vated by poor fed­eral man­age­ment. Among the issues, HUD en­cour­aged lenders to help home­own­ers max­i­mize the sizes of their loans by tak­ing younger spouses off the mort­gage doc­u­ments, lead­ing to fore­clo­sures on wid­ows, he said.

“It’s their own fault for any losses they are see­ing,’’ he said. “The re­sponse is to make it harder for peo­ple who need the money to get ac­cess to the pro­gram.”

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