No matter how long the weekend is, it never seems quite long enough. Traders might be starting to wonder how long runs in the stock market can last. It’s interesting to think about at this point.
Before we get there, let’s see what’s going on in terms of economic data.
Consumer Price Index (CPI)
Overall inflation was up 0.2% on a seasonally-adjusted basis. It’s up 2.3% on the year. When food and energy were taken out, the index was up 0.1%, also up 2.3% on the year.
Taking a look at major categories, gasoline prices were up 2.8% in December. Overall energy costs were up 1.4%. The price of food was up 0.2%, and it’s up 1.8% on the year. Energy prices are up 3.4% annually.
The price of new vehicles was up 0.1% and 0.1% on the year, while used cars and trucks were down 0.8% and 0.7% since last December. Apparel costs were up 0.4%, but have fallen 1.2% annually. Finally, transportation services were down 0.3%, but have gone up 0.6% on the year.
Big gains were seen out of medical care commodities, up 1.5% and 2.5% over the last 12 months as well as medical care services, which were up 0.4% and 5.1% annually. The cost of shelter was up 0.2% and 3% since last December.
MBA Mortgage Applications
Driven by low rates and a job market that’s humming, mortgage applications were the highest they’ve been in over a decade (October 2009) last week, according to the Mortgage Bankers Association. Applications were up 30.2% overall after seasonal adjustments. Applications were up 67% when these adjustments were removed.
Purchase applications were up 16% with seasonal adjustments and 51% overall from the prior week. Activity is 8% higher than the same time in 2019.
On the refinance side, applications were up 43% overall for the week and 109% on the year. The refi market accounts for 62.9% of the mortgage applications at the moment. The average interest rate was down four basis points to 3.7% with a down payment of 20%. This is the lowest the rate has been since September.
Producer Price Index (PPI)
On the producer’s side of the ledger, prices were up 0.1% overall and up 1.3% on the year. The price for goods was up 0.3% on the month while service prices were flat. Without food and energy, prices were also up 0.1%. Without food, energy and wholesalers sales, prices were up 0.1% and 1.5% on the year.
Food prices were down 0.2%, but overall energy prices were up 1.5%. Trade services were down 0.3%.
Initial jobless claims were down 10,000 last week to settle at 204,000. Meanwhile, the 4-week average was down 7,750 to 216,250.
Continuing claims were down 37,000 to 1.767 million. Meanwhile, the 4-week average of continuing claims was down 10,500 to 1.756 million.
Retail sales were up 0.3% in December to come in at $529.6 billion. This is 5.8% higher than December of last year.
Motor vehicle sales were down 1.3% on the month, but at 4.1% on the year. Electronic sales were up 0.6%, but down 0.7% on the year. Meanwhile, sales at furniture and home stores were up 0.1% and 3.2% from last December. Food and beverage sales were up 0.4% and 3.7% annually. Sales in health and personal care were at 0.4%, with 3.8% annual advancement. General merchandise stores were up 0.6% and 2.2% annually. In the sporting goods, hobby musical instrument and bookstore sector, sales were up 0.9% and 1.8% annually.
Gas station sales were up 2.8% on the month and 11.3% on the year. Home and furniture stores were up 0.1% and 3.2% annually. Nonstore retailers saw a 19.2% annual increase after going up 0.2% in December. Food and beverage sales were up 0.4% and 3.7% annually. Meanwhile, restaurant sales increased 0.2% and 4.9% since last December.
Housing Market Index
The U.S. housing market index fell one point to 75 in January, but December was a 20-year high according to the National Association of Home Builders. In terms of components, current single-family sales were down three points to 81. Expectations for future sales were unchanged at 79 and traffic of prospective buyers looking at new homes was up one point to 58.
At the regional level, the West remains the hottest region, up four points on the month to 886. The South held steady at 77. The Midwest had a fair drop down seven points to 66. The Northeast was up three points to come in at 62.
Housing starts were up 16.9% to 1.608 million. This is up 40.8% for the year. Single-family starts were up 11.2% to 1.055 million. Multifamily units were at 536,000. Overall housing starts were up 3.2% on the year.
On the permit side, these were down 3.9% on the month, but at 5.8% since December of last year. Single-family permits were down 0.5% at 916,000, while there were 458,000 multifamily authorizations. Overall permits were up 3.9% on the year.
Housing completions were up 5.1% compared to November at 1.277 million overall. Single-family units were up to 912,000, an increase of 0.7% in December. There were 357,000 multifamily completions.
Industrial production was down 0.3% in December and has fallen 0.5% since 2018. Capacity utilization was down 0.4% to 77% of factory space.
Overall manufacturing was up 0.2% and mining was up 1.3%, but there was a 5.6% downturn in utility production and a 1.2% drop in production of consumer goods.
Materials production was flat and construction was up 1.6%. There was also a 0.1% increase in nonindustrial supplies.
Overall consumer sentiment was down 0.2 points to 99.1 in preliminary results for January. This is up 8.7% on the year. When it comes to current economic conditions, this was up 0.3 points to 115.8 and has risen 6.4% since January 2019. Meanwhile, consumer expectations are up 10.5% on the year despite falling 0.6 points to 80.3 in January.
Consumers are feeling good about their financial situation and impeachment isn’t really on the radar. Expectations for inflation over the next year were at 2.5%, up 0.2%. Additionally, January saw a 0.3% increase in inflation expectations over the next 5 years to 2.5%.
Mortgage rates were up just slightly last week. They remain in a really good spot and there’s a strong job market, so it’s a great opportunity to purchase or refinance if you’re ready.
The average rate for a 30-year fixed mortgage was up a single basis point to 3.65% with 0.7 points paid in fees. This is down from 4.45% at the same time a year ago.
The average rate on a 15-year fixed mortgage with 0.7 points was up a couple of basis points on the week to 3.09%, but it’s down from 3.88% last year.
Finally, the average rate for a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up nine basis points to 3.39% with 0.3 points paid. This is down from 3.87% a year ago.
Stocks were up on Friday, hitting yet more records. A couple of key reasons for this included a strong reaction to a really good housing data as starts numbers point to real optimism in the sector. In addition, Chinese industrial data was better than expectations, a signal that the global economy seems to be on good footing at the moment.
The Dow Jones Industrial Average finished the day at 29,348.1, up 15.46 points on Friday and rising 1.53% for the week. The S&P 500 was up 1.26% on the week after rising 12.81 points Friday to close at 3,329.62. Finally, the Nasdaq was up 31.81 points Friday, closing at 9,388.94, up 1.24% for the week.
The Week Ahead
Wednesday, January 23
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.
FHFA House Price Index (9:00 a.m. ET) – The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing using data provided by Fannie Mae and Freddie Mac. The HPI is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
Existing Home Sales (10:00 a.m. ET) – Existing Home Sales tallies the number of previously constructed homes, condominiums and co-ops that were sold during the month. Existing homes (also known as “home resales”) account for a larger share of the market than new homes and indicate housing market trends.
Thursday, January 24
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 4-week moving average of new claims smooths out weekly volatility.
Next week represents a much lighter week in terms of economic data, but we’ll have it all covered for you next week’s Market Update!
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