Market Matters

With the Fed in their quiet period due to their upcoming FOMC meeting next Tuesday and Wednesday, it felt like the moves in the treasury market were technical and choppy, as the 10-year rallied and moved through several points of resistance. Next week is a big week with the FOMC statement on Wednesday and jobs report on Friday. Market is expecting 75 bps hike this meeting, December's meeting the market is expecting a 50 bps hike. This market has been very volatile, so, be careful as it can turn very quickly.

 

Initial Jobless Claims

Initial Jobless Claims are hovering around historically low levels with companies hesitant to lay off workers. Higher rates and the cooling economy are pressuring businesses to recalibrate demand for labor. We estimate that only about 35k jobs need to be created each month to hold the labor market steady, while there were net job gains of 263k in September. Those gains ought to slow sharply going forward.

 

Real GDP

Real GDP growth came in at +2.6% annualized according to the BEA's first look, a touch better than the expected +2.4% and the first positive in three quarters. Final sales (GDP ex-inventories) rose a solid 3.3. Breaking that down, we saw a +0.97 pp contribution from personal consumption expenditures, which remains rather soft -- the second-lowest reading of the recovery and down from Q2's +1.38 pp. Worse, private fixed investment contributed -0.89 pp, just about even with last quarter's -0.92 pp and also the second-lowest of the recovery. The change in private inventories was again a sizable drag, subtracting 0.70 pp from the headline, though at least that was less than Q2's -1.91 pp. What really rescued the headline was a +2.77 pp in net exports (+1.63 pp from exports, +1.14 pp from lower imports), the largest positive from that component since Q3 1980. Government consumption and investment contributed +0.42 pp, the first positive in six quarters.

 

New Home Sales

New Home Sales for September came in at 603k, which is a nice beat from market expectations of 580k but is still down from last month's revised number of 677k. MoM, new home sales is down 10.9%, which is a beat from expectations of down 15.3%, but is still down from the prior month's reading of 24.7%. Mortgage rates rose to 7.16% last week, the highest level since 2001.

 

S&P/Case-Shiller HPI

S&P/Case-Shiller 20-city HPI for August came in a bit under market expectations, -1.32% MoM, versus expectations of -0.8%, compared to the prior month's revised number of -0.69%. Looking at the YoY change, it is now at 13.08%, compared to the expectations of 14.00%, and compared to July's revised number of 16.01%. The U.S. Home Price Index came in at 12.99% YoY, compared to July's 15.625%."The forceful deceleration in U.S. housing prices that we noted a month ago continued," Craig J. Lazzara, managing director at S&P Dow Jones Indices, said in statement. "Price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since."