December 24, 2021

Weekly Market Commentary December 20th to December 24th 2021

Personal Consumption Expenditures (PCE), the Fed’s preferred gauge of inflation, cooled a bit in November relative to the prior month, coming in at 0.6%, in line with consensus. The year-on-year reading remains well above average at 5.7% and 4.5% for the core, excluding food and energy.

Existing Home Sales rose 1.9% in November to 6.46 million units (annualized.) The reading exceeded the 6.34 million level reported in October. While modestly behind the consensus estimate, at this rate, home sales are on pace for the strongest year since 2006. New Home Sales were higher by 12.4% in the month to 744k (annualized). The sharp increase reduces new homes inventory from 7.1 to 6.5 months of supply while median new home prices have increased a whopping 19% from this time last year.

Orders for Durable Goods exceeded the highest forecast in the range, coming in at 2.5% for New Orders in November, driven primarily by transportation equipment. Focusing in on Core Capital Goods, which exclude transportation, aircraft and defense spending, the reading was modestly negative at -0.1%, below the consensus estimate of 0.5%

The third and final estimate of Q3 GDP was revised modestly upward from 2.1% to 2.3%. The primary driver was an upward revision to Personal Consumption from 1.7% to 2.0%

In a holiday shortened trading week, the S&P 500 recovered losses from the sell off last week and broke into new record closing territory, finishing higher by 2.3% to 4,425. Led by a recovery in large cap tech stocks, the Nasdaq Composite was higher by 3.2%. The 10-Year U.S. Treasury yield rose modestly during the week from 1.40% to 1.49%.

Next week is light for key economic releases, which include regional manufacturing data and Weekly Jobless Claims.