Weekly Market Commentary December 19th to December 23rd 2022

It was once again a week of mixed data and good news being considered bad news at times. Let’s start with the release of Housing Starts, Building Permits, Existing Home Sales, and New Home Sales. November Starts came in as expected, a 0.5% decline from the previous month, and Permits dropped 11.2% from October. Existing Home Sales were down 7.7% following a 5.9% decline the previous month, continuing the downward trend in the real estate market. On the positive side, New Home Sales were up 5.8% in November likely due to mortgage rates coming off recent highs.

In the good news is bad news department, third quarter GDP was upgraded to +3.2% which immediately caused a market selloff as investor fears of continued rising interest rates were reaffirmed. This was also the case with Weekly Initial Jobless Claims which showed very little evidence of worsening; coming in at 216,000 when consensus called for 225,000. As mentioned before, this is a number the Fed is likely watching closely as they would like to see a slowing economy and worsening employment is a key measure of that.

Finally, we closed out the week with consumer expenditures, inflation data, and durable goods. Personal Income was up slightly more than predicted while Consumer Spending came in less than expected. The PCE Deflator, a key inflation measure, matched expectations and was slightly lower than last month. This is good news, but we need to see a trend in falling inflation over more than just a month or two in order to say the Fed policies are working. Lastly, both Durable and Capital Goods Orders disappointed at -2.1% and +0.2% respectively when consensus called for -1.0% and +0.3%.

In the markets, equities were mixed on the week. The S&P 500 finished basically flat for the week at 3,845; the NASDAQ dropped 1.9%; while the Dow Jones Industrials finished up 0.9%. Bond prices dropped across the board with the 2-Year US Treasury finishing at 4.31%; the 10-Year closing at 3.75%; and the 30-Year ending the week at 3.82%.

Next week will have limited economic data releases due to the holidays. Look for Pending Home Sales and Weekly Jobless Claims. Happy holidays from all of us at Plimoth Investment Advisors!