I love my job, but I’m not going to lie – it was really tough getting out of bed this morning. I hope everyone had a good holiday season.
It was a lighter week in terms of economic data as most people were probably focused on spending time with loved ones, but a few reports did manage to sneak out in the week between Christmas and the new year. Let’s run through them.
S&P Corelogic Case-Shiller HPI
Home prices were up 0.2% overall for the month of October, according to Case-Shiller’s 20-city index. When accounting for normal seasonal patterns, prices have risen 0.7% on the month and 6.4% overall on the year.
Revisions to previous data were also mostly good, up 0.5% to a 1.0% increase for September and only a 0.2% dip in August revisions to a 0.2% gain. The increasing prices are being blamed on low inventory.
At the city level, all cities surveyed show monthly price gains. Las Vegas home prices are up 1.4%, with San Francisco following at 1.2%.
Consumer confidence fell a little bit in December to 122.1, a 6.5 point drop from November. The good news is that just 15.2% of people say jobs are hard to get, which is a decrease from the last two months.
Optimism about the future of the job market wasn’t as strong. Optimism fell almost 2% to 18.4%. Meanwhile, pessimism increased more than 4% to 16.3%
There was also an increase in those who see incomes going up that was unfortunately offset by a rise in people that see their income falling. One way or another, people expect their incomes to start moving in the coming year.
Pending Home Sales Index
The number of existing homes under contract for sale increased by 0.2% to an index level of 109.5 in November. This is slightly below consensus expectations for a 0.5% gain and off last year’s pace.
What’s strange is that existing home sales have been higher despite the number of pending sales lagging. In last week’s data, existing home sales were at 5.810 million on a seasonally adjusted annualized basis, up 3.8% on the year. Meanwhile, the number of homes with the purchase agreement in place is up only 0.8%.
In order for something to be reported as a pending sale for the month, there has to be some lag between the purchase agreement and the finalized purchase. Because of tight inventory, it’s possible that buyers and sellers are seeing homes come off the market quickly enough that they’re not being reported as a pending sale.
Turning to regional data, there were small declines in the West and South, a minor uptick in Midwest pending sales and a 4.1% increase in the Northeast. The Northeast region has seen the pace pick up for both new and existing home sales recently.
International Trade in Goods
The U.S. trade deficit in goods increased $1.6 billion to $69.7 billion in November. This points to quite an increase from the average $63.8 billion deficit in the third quarter.
The good news is that exports were up 3.0% to $133.7 billion. Capital goods exports were up 5.6%, with vehicles following at 7.5%. The holiday buying season also appeared to have an effect, with consumer goods purchases adding 4.0% to the export number.
More than offsetting this, however, was the fact that imports rose 2.7% to come in at $203.4 billion. Industrial supplies imports were up 4.7%, followed by consumer goods, up 4.2%. Finally, capital goods bumped up 2.6%.
A small positive was the fact that wholesale inventories were up 0.7% in the preliminary data, while retail inventories only managed to rise 0.1%.
Initial claims for unemployment were unchanged last week at 245,000. This is a bit on the high side given recent numbers, but it’s worth noting that a large portion of states had to have their numbers estimated because of the holiday week. The four-week average was up 1,750 to 237,750.
The number of continuing claims was up 7,000, to come in at 1.943 million last week. The four-week moving average was down 4,250 to about 1.920 million.
Mortgage rates were up last week, feeling the effects of last week’s uptick in long-term interest rates. Rates are still very good. If you’re looking to buy or refinance, it remains a good time to lock your rate.
The average rate on a 30-year fixed mortgage with 0.5 points in fees was up five basis points to 3.99%. At this time last year, the rate was 4.32%.
Looking at shorter terms, the average rate on a 15-year fixed mortgage was 3.44% with 0.5 points, up six basis points on the week and rising from 3.33% at the same time last year.
Finally, the average starting interest rate on a 5-year treasury-indexed hybrid adjustable rate mortgage (ARM) was 3.47% with 0.3 points, up from 3.30% last year after having risen eight basis points on the week.
Despite an apparently unprompted selling wave that hit all three indexes Friday, the S&P 500 had its best year since 2013.
The Dow Jones industrial average fell 118.29 points on the day and 0.14% on the week after closing at 24,719.22 Friday. The S&P 500 closed at 2,673.61, down 13.93 points on the day and 0.36% on the week. Finally, the Nasdaq was down 0.81% on the week after finishing at 6,903.39, having fallen 46.77 points Friday.
The Week Ahead
Wednesday, January 3
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
ISM Manufacturing Index (10:00 a.m.) – This index measures the general direction of manufacturing within the U.S. The qualitative survey of purchasing managers looks at production, new orders, order backlogs, inventories and supplier deliveries, among other factors.
Thursday, January 4
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.
Friday, January 5
Employment Situation (8:30 a.m. ET) – The employment situation report measures unemployment in the labor force as well as the sentiments of workers about the job market.
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
This week starts slow, but things begin to pick up tomorrow with a big manufacturing report. The end of the week brings import and export numbers and the always important jobs report for December. We’ll have it all covered next Monday in Market Update.
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