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Market Matters

We saw bond yields push lower this week as U.S. companies continued to report Q2 earnings, along with tensions between the U.S. and China rising. We did see an unexpected increase of initial jobless claims on Thursday, which could be an indication that we are looking at more of “W” recovery than a “V.” The market has a few things to keep an eye on next week such as U.S.-China relations and the expiring unemployment bonus of $600 a week for which Congress will be in a rush to get a bill passed to extend additional unemployment benefits. Both Republicans and Democrats appear to want to extend additional benefits, but, as of today, it appears both sides are far apart.

 

Initial Jobless Claims

Initial Jobless Claims for the week ended July 18th were up by +109k to 1.416mln vs. the prior week’s revised print of 1.307mln (orig. 1.3mln). Claims are now the highest in 4 weeks and back above their 4-week average for the first time in 15 weeks. This is also the first weekly increase in claims since the week of March 28th when claims rose to the record high of 6.867mln. Continuing claims decreased, as they lag by a week, to 16.197mln in the July 11th week, which is 1.107mln fewer than the prior week’s revised print of 17.304mln (orig. 17.338mln). Due to the lag by a week, continuing claims will probably not see any significant rise for another week or so.

 

Existing Home Sales

According to the National Association of Realtors, Existing Home Sales for June were up by +20.7% to a 4.72mln annualized rate from a prior 3.91mln. While June’s improvement was the largest monthly gain since the data began recording in 1968, it came after three months of declines (-8.5% in March, -17.8% in April, and -9.7% in May). Looking YoY, sales are still -11.3% lower. Again, the count on existing home sales is based on closings, which means contracts signed in late April and May for this data set. The supply of existing homes dropped to just 1.57mln homes for sale at the end of June, putting the YoY rate down -18.2%. Based on the current sales pace, this represents a four-month supply. Last year in June, there were close to +350k more homes for sale. The median price for an existing home sold in June rose +3.5% annually to $295,300. Regionally, sales rose by +4.3% in the Northeast, up +11.1% in the Midwest, higher by +26% in the South, and +31.9% better in the West. Finally, first time homebuyers made up roughly 35% of sales in June, up slightly from 34% in May. According to the NAR, “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.” However, they also note, “Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply."

 

FHFA House Price Index

The FHFA said its House Price Index dropped by -.3% in May, as prices were down or unchanged in 8 out of 9 census divisions, while the +.2% April print was downwardly revised to only a +.1% gain on the month. On an annual basis, prices are +4.9% higher than this time in 2019. The seasonally adjusted monthly changes in the census divisions ranged from -0.8 percent in the Pacific division to an 0.1 percent gain in the South Atlantic. The 12-month changes were all positive, ranging from 3.7 percent in the New England division to 6.3 percent in the Mountain division.

 

Philly Fed Index

The Philly Fed Non-Manufacturing survey’s general business activity index increased by +16.4 points to +23.7 in July, while its region-level index only rose by +4.3 points to +.7. Within the July report, data on orders growth showed new orders up +26.4 to +13.8, and unfilled orders up +17.8 to +5.5. Sales/revenues rose by +10.8 to +11.1, while inventories fell a little faster, down -1.2 to -4.6. Unfortunately, while prices paid rose +7.9 to +9.9, prices received continued to fall, posting down -.1 to -13.8. Within the labor market data, the full-time employment index rose +15.2 to -8.1, the part-time index rose only +3.7 to -20.7, the workweek fell -5.1 to +1.6, and wages and benefits rose +5.8 to +2.3.