Weekly Market Commentary November 18th to November 22nd 2024
Last week was a relatively light week for economic data. We received housing data suggesting it will take more time before we see an improving housing market. We also received upbeat data from manufacturing and services surveys, showing optimism for the upcoming year.
Building Permits, a leading indicator of construction, fell 0.6% in October after falling 3.1% in September. In addition, Housing Starts declined 3.1% over the same period, below consensus estimates. Small growth in single-family homes was more than offset by a decline in those with five units or more. Recent data showed a surge in builders’ confidence in the potential for fewer regulatory hurdles under the upcoming administration. Still, mortgage rates remain elevated, and affordability issues have left new-home inventories hovering near record highs.
Existing Home Sales improved in October, increasing 3.4% to a 3.9 million annualized pace. Homebuyer interest improved after the Fed’s 50bp rate cut in September, but mortgage rates have risen since then. This divergence will likely dampen housing demand, while tight existing inventory keeps prices elevated.
Initial jobless claims on the week were 213,000, slightly below estimates but well within the average range over the past couple of years. A jump in continuing claims is a signal for a cooling labor market as people are having a harder time landing work. Recent announcements of job cuts from Boeing and Stellantis will likely weigh on these numbers in the near term.
Activity in manufacturing and services reached its highest level since April 2022. While driven by a further expansion in services, manufacturers were the most upbeat about future production in years. The prospect of lower interest rates and a more pro-business regulatory environment has fueled greater optimism, in turn helping drive output and order book inflows higher.
Equity markets moved higher last week after pulling back previously. The S&P 500 closed 1.7% higher to 5,969, the Nasdaq 1.7% higher to 19,003, and The Dow Jones Industrials 1.9% higher to 44,296. Yields were mixed with the 2-Year U.S. Treasury yield moving 7bps higher to 4.38% while the 10-Year U.S. Treasury fell 2bps to 4.41%, narrowing the spread to just 3bps.
This week we will see revised GDP estimates for Q3 as well as the PCE inflation report to end the week.
