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December 28, 2020

Weekly Market Commentary December 21st to December 24th 2020


The housing market has had a fantastic 2020 but some numbers are coming back to Earth. Existing Home Sales came in at 6.7 million annualized, in line with estimates and down from last month’s reading. However, New Home Sales were a major disappointment coming in at 841,000 annualized, versus an estimate of 995,000. New Home Sales estimates for last month were revised downward by more than 50,000, to boot. A Mortgage Bankers Association report showed that growth in new mortgage applications has been slowing, though refinancing activity has been booming, thanks to low interest rates.

Other economic reports were mixed. The final estimate of GDP growth for last quarter was 33.4%, higher than the 33.1% expected. Durable Goods Orders came in at 0.9%, reflecting a revival of manufacturing. Strong sales of motor vehicles and auto parts helped drive the result. Last month’s figure was revised upwards to 1.8%. However, a report showed that personal income dropped 1.1% yearly, and personal spending declined 0.4%. Lower unemployment payments could be a key contributor.

Weekly Jobless Claims came in much lower than expected at 803,000. They were down 10% from last week’s 892,000 reading. However, this decline was due to stronger fraud protections imposed by several states including Illinois and Louisiana. Pressures on the labor market remain due to the Coronavirus restrictions in place in large states such as California and New York and the troubling uptick in cases and hospitalizations.

U.S. equity market indices were mostly unchanged for the week, weighing rough Coronavirus numbers and flagging economic data against vaccine progress and a Brexit deal that was reached on Thursday. The benchmark S&P 500 fell -0.2% for the week to 3,703. The Nasdaq Composite rose 0.5% to 12,805, and the yield on the 10-Year U.S. Treasury fell by 2 bps to 0.93%. A resolution on the COVID relief bill and the size of direct payments will heavily influence markets next week.

Next week will also be shortened by the New Year’s holiday. Key economic releases include Weekly Jobless Claims and manufacturing surveys out of Chicago and Dallas. Happy Holidays!