January 21, 2022

Weekly Market Commentary January 17th to January 21st 2022

Existing Home Sales dropped -4.6% to 6.18 million units annualized in December despite strong demand as supply hit a record low. There were just 910k homes for sale at the end of the month, representing 1.8 months of supply. Encouragingly, demand was unabated as home prices reaccelerated and homes were sold in just 19 days on average. Overall, the housing market had its strongest year since 2006 with a total of 6.12 million sales.

Housing starts increased to 1.7 million units, a nine-month high due to a surge in multi- family housing projects and single-family starts in the Northeast and Midwest. The acute shortage of homes for sale is driving homebuilding but, rising rates and supply constraints could hamper homebuilder sentiment moving into 2022. Building Permits, an indicator of future demand rose 9.1% in the month to 1.87 million and did not show such concerns. The reading well surpassed estimates of 1.70 million units.

The New York Empire State Manufacturing Index plunged to -0.7 from 31.9 which was well below the market forecasts of 25. The reading pointed to the first contraction in NY manufacturing since the second quarter of 2020 as demand for goods declined amid the spread of the Omicron variant.

Market volatility overshadowed the macro- economic news as the Nasdaq experienced its worst week since March of 2020 and entered correction territory. All major indices finished lower for the week. The Dow Jones was down -4.6%, finishing at 34,265. The S&P 500 closed at 4,397, down -5.7% and marked the first time the index finished below 4,400 since October. In the risk off move, the Nasdaq finished -7.6% lower at 13,768. Fixed income markets are now fully pricing in a rate hike for the March meeting which has been a contributing factor to the market volatility.

Next week’s economic releases include GDP and Personal Consumption Expenditures, and an FOMC Meeting that will be closely watched.

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