Weekly Market Commentary January 15th to January 19th 2024

Retail Sales in December came in at 0.6%, ahead of the consensus forecast and the prior month’s reading of 0.3%. Excluding vehicle sales, the reading was marginally lower at 0.4%, but also ahead of estimates and the prior month of 0.2%. Gasoline station sales were down 1.3%, after falling 3.4% in the previous month, as a function of falling gas prices rather than falling sales volume. Sales at non-store retailers (e-commerce), which typically experience a holiday pop in December, were higher by 1.5%, accounting for 17% of all retail sales.

Housing Starts in the U.S. declined 4.3% in December to 1.46 million units on a seasonally adjusted annual basis. The pullback was marginally less than the consensus forecast, with the lion’s share of the weakness coming from the Northeast. Building Permits, on the other hand, rose by 1.9% to 1.47 million. Interestingly, the Northeast was the strongest region for newly planned projects. We’ll be tuning in to see how many get off the ground, with mortgage rates giving an inch so far this winter.

Existing Home Sales continue to be in a deep freeze. The annual rate of 3.78 million units reported for December was down 1% from the prior month and -6.2% on a year-on-year basis. The level of sales in 2023 was the lowest in 28 years. Inventory remains low, leaving visions of homeowners in warm woolen socks sitting comfortably by fireplaces with their affordable mortgages acquired before the Fed’s aggressive tightening.

Tech stocks heated up again this week, sending major market indices into record high territory. The S&P 500 made its first new record high in two years, closing at 4,839, up by 1.2% this week. The Nasdaq Composite was higher by 2.3% to 15,310. Even the stodgy old Dow Jones Industrials managed to break through a record set earlier this year to 37,863 (despite the technology led rally), up 0.7% for the week. The yield on the 10-Year U.S. Treasury added 18 basis points, closing the final trading session at 4.13%, its highest level of 2024.

Key economic releases next week include Personal Consumption Expenditures (PCE), Durable Goods Orders, Purchasing Managers Index (PMI), a first look at fourth quarter Gross Domestic Product (GDP) and New Home Sales.