Weekly Market Commentary June 17th to June 21st, 2024
There is mounting evidence that the U.S. economy is showing signs of slowing, a welcomed development for the Federal Reserve that is looking to cool the economy. Retail Sales in May increased by 0.1% MoM, below the 0.3% that was expected, while figures for both March and April were revised lower. Spending at bars and restaurants, the only category of the report that measures services activity, declined 0.4%. This reaffirms what we have seen in various other reports, including Consumer Credit which recorded lower revolving credit use (credit cards, personal and business lines) as households are continuing to deal with inflation and costlier debt, a dynamic that appears to be taking a toll on the consumer.
Housing activity has come to a halt as all-time high prices and higher borrowing costs have restricted purchases. Housing Starts fell 5.5% from April to an annual rate of 1.28 million units, missing the consensus estimate of 1.38 million units. Building Permits in May also fell short of estimates by .06 million at 1.39 million units. The National Association of Home Builders confidence survey reached a six-month low in June, citing consistently high mortgage rates as an obstacle for many potential buyers entering the market.
Existing Home Sales fell for a third straight month, decreasing 0.7% to a 4.11 million annualized rate but slightly beat estimates of 4.09 million. Inventory for homes, while still historically low, were up 6.7% MoM and 18.5% higher than a year ago. Despite the slow Spring season, realtors believe more inventory will help boost home sales and tame home prices. At the end of May, the median price of an existing home sold was $419,300, a record high, and up 5.8% YoY. With no equity from previous purchases, first time home buyers have continuously squeezed from the purchasing, now accounting for 28% of sales, compared to 31% a year ago.
In a holiday shortened week, volatility was relatively muted in both the equities and fixed income markets. The S&P 500 finished at 5,465, up 0.61% while the Dow Jones increased 1.45% to 39,150. The Nasdaq lagged behind but still finished in the green at 17,689. The yield curve experienced a parallel shift higher with the 2 and 10 year treasury finished a few basis points higher than last week’s close, at 4.73% and 4.25%, respectively.
Key economic releases next week include Pending Home Sales and Personal Consumption Expenditures (PCE).
