Market Matters
U.S. Treasuries and MBS both sold off heavily this week. In the simplest terms, it is a mix of what is being called the reflation trade, MBS investors having to update their hedges on their MBS portfolio causing them to sell 10-year treasuries which worsened the selloff, and a very sloppy 7-year auction. The market is oversold (it has been for some time) and the best bet is to stay very defensive until it stabilizes.
Initial Jobless Claims
Initial Jobless Claims for the week ended February 20th fell -111k to 730k from a revised 841k (orig. 861k) in the prior week. Continuing claims, which lag by a week, fell by -101k to 4.42mln, the lowest since March 21st of last year. Continuing claims are now down 20.5mln from the peaks reached during the week of May 9th. They have fallen in each week by 4 since July 18th, and over that time, have dropped a total of 12.5mln. However, the numbers this week are a bit suspect. The sharp declines are likely due to people in the states hardest hit by the recent winter storms taking care of other things rather than being able to report claims.
Durable Goods Orders
Durable Goods Orders in January rose by +3.4% on headline, the strongest MoM growth rate since back in July of last year. The main driver was aircraft orders, which are now at their highest levels in a year. Ex-transportation, we still see a +1.4% increase on the month, while core capital goods orders posted up +.5%. We also saw revisions to December’s data with headline orders now at +1.2% vs. +.5% originally reported, and ex-transportation orders up to +1.7% from +1.1%. Core capital goods shipments, which drive GDP capex, rose by +2.1% MoM, which creates solid momentum for business investment at the start of Q1. This will also reinforce the strong momentum for consumption created by the January surge in retail sales.
Pending Home Sales
Pending Home Sales fell -2.8% to 122.8 in January according to the National Association of Realtors. This is now the lowest read since July of last year, and down from the 130.3 back in August. Again, pending home sales measure signed contracts, whereas existing home sales measure closed sales. We also see December’s numbers revised to +.5% from a prior -.3%. The decline was most pronounced in the West, where sales were down 7.8%. It was also an ugly month in the Northeast, where sales were down 7.4%. They were down only 0.9% in the Midwest, but that was still enough to join the other two in being the weakest since June. The South saw a 0.1% uptick, making for a three-month high.
New Home Sales
New Home Sales for January were up by +4.3% to a 923k annualized unit rate from a revised 885k (orig. 842k) in the prior month. Looking YoY, new home sales are up +19.3%. Within the monthly data, the median sales prices of a new home sold in January was $346,400, while the average sales price was $408,800. There were 307k new homes for sale at the end of January, which represents a 4-month supply at the current sales pace. The months’ supply numbers are down -2.4% MoM, and now down -20% YoY. Broken out by region, sales in the Northeast fell -13.9% on the month and are down -8.8% on the year. The Midwest is up +12.6% on the month, and up +10.3% YoY. In the South, sales are up +3.0% on the month, and up +40.4% annually. Finally, the West sees sales up +6.8% monthly, but down -6.3% YoY.
