Weekly Market Commentary November 14th to November 18th 2022
This week featured a slew of housing data. Housing Starts, Building Permits, and Existing Home Sales all declined from last month (-4.2%, -2.4%, and -5.9%, respectively). These numbers were largely in-line with predictions from economists. Higher mortgage rates are continuing to take a bite out of housing activity. In soft data, the NAHB’s Homebuilder sentiment survey came in at a contractionary reading of 33 vs. the 38 that economists expected.
Retail Sales surprised to the upside with a monthly gain of 1.3% vs. 1% expected. Consumers are opting to spend heavily on travel and experiences as the labor market remains strong. The ‘Control Group’ of important retail categories that filters into GDP was up 0.7%, easily beating the 0.3% projection. In labor market news, Initial Jobless Claims declined slightly to 222,000, beating estimates for 228,000.
The Producer Price Index marked a continuation of the trend shown in last week’s Consumer Price Index, as prices rose only 0.2% from last month and were flat when stripping out the volatile costs of food and energy. On an annual basis, prices are up 8% or 6.7% ex-food and energy. It appears that the Federal Reserve’s interest rate hikes are beginning to sap consumer demand, causing prices to retreat as expected.
Local manufacturing indices showed slowing factory activity. The Philadelphia Fed’s regional survey came in at a -19.4 reading vs. -6 expected, while a comparable survey from the Kansas City Fed registered a -6, in line with expectations but still suggesting a decline in economic activity. New York’s Empire Manufacturing survey was the lone gauge in positive territory at 4.5.
Stocks were range-bound after massive gains last week. The S&P 500 wound up down 0.7% to 3,965. The yield on the 10-Year U.S. Treasury rose ever so slightly to 3.83%, far below the 4.53% yield on the 2-Year U.S. Treasury. That makes for an inversion of -0.70%, the largest at any time since 1979.
Next week, important economic releases include S&P Global’s PMI readings, New Home Sales, and Durable Goods Orders.