Market Matters

This has been a rough week for the 10-year, as it seemed like it kept climbing day over day, with a relatively light data week. Technically the 10-year is starting to look a bit oversold, but with a no upcoming data days, momentum could take the 10-year even higher. Inflation is an issue the markets are following closely, and as inflation expectations keep going higher, so does the 10-year. The market is pricing in a rate hike in September 2022, which seems aggressive. This is a sign that the market thinks that inflation will either get out of hand or the Fed turns hawkish to inflation much quicker than their recent guidance that they will let inflation run hotter for longer. It will be interesting to see if Chairman Powell looks to talk down rate hikes in the next Fed meeting on November 3rd.

 

Initial Jobless Claims

Initial Jobless Claims for the week ended October 16th fell by -6k to 290k from an upwardly revised print of 296k (orig. 293k) in the previous week. The 4-week moving average of claims fell by roughly -16k from a prior 335k to now 319k. Continuing claims, which lag by a week, dropped to 2.481mln from a revised 2.603mln (orig. 2.593k) for the week ended October 9th. The total of those receiving benefits under all state and federal programs fell by 369,992 to 3.279mln, according to the data through October 2nd.

 

Existing Home Sales

According to the National Association of Realtors, existing home sales increased by +7% to a seasonally adjusted rate of 6.29mln units in September. Looking at the YoY numbers, sales were -2.3% lower vs. September 2020. In the data for the month, the supply of homes for sale ended September at 1.27mln units, which represents a 2.4-month supply at the current sales rate. This is down by -13% from a year ago. As lower supply continues to push prices higher, we see the median home price for sales in September at $352,800. This is now +13.3% higher vs. the same time a year ago. First time homebuyers made up only 28% of sales for the month, which is the lowest now since July 2015.

 

Housing Starts

Housing Starts came in at 1.555 million for September, a bit lighter than the market expectation of 1.615 mm, while building permits came in at 1.589mm, also missing expectations of 1.68mm. Housing Starts MoM are down 1.6%, missing expectations for a flat reading, while building permits were down 7.7% m/m, also missing expectations of -2.4%. The drop in the permits is attributed to a sharp drop in multifamily permits. Interestingly the report showed that the number of homes under construction but not yet completed rose to the highest level since 1974.

 

Philly Fed Manufacturing Index

The Philly Fed Manufacturing Survey dropped to +23.8 in October from a previous +30.7 in September. While this print is far down from the peak back in April of +50.2, it is right in-line with the 3-month average at +24.0. Within the data, delivery times rose +11.8 points to +32.2, its third highest in data back from 1968. Prices paid rose +3.0 to +70.3, as the prices received slipped -1.8 points to +51.1. Demand was solid as new orders rose +14.9 points to +30.8, now a 5-month high print. Unfilled orders rose +7.3 points to +12.7, a 3-month high, as shipments ticked up +.1 to +30.0, it’s best number in a year. It is important to note that shipments consistently remained higher even in a time when we see such high disruption in supply chains.