Market Matters
The FOMC meeting this week was the main event, as the Fed came out very hawkish and we saw a steep sell-off in the market. One of the key points that the market did not like was that Chairman Powell did not take away the possibility of a 50-bps rate hike at the March meeting. The Fed gave the head nod that they will begin raising rates in March and that they will look to runoff the balance sheet later this year. Wednesday was an extremely volatile day during the FOMC announcement, and Thursday the market rebounded nicely with positive GDP data. The market appears to be believing in the Fed hawkishness and that they will move aggressively, maybe aggressive enough to tame the inflation that the economy is seeing. Best to be careful here because this market is extremely volatile and choppy.
Initial Jobless Claims
Initial Jobless Claims fell -30k to 260k for the week ending January 22nd vs. the revised 290k (was 286k) in the prior week. The 4-week moving average jumped by +15k to 247k, up +36k in only two weeks. Continuing claims, which lag by a week, rose to 1.675mln from a revised 1.624mln (was 1.635mln). Continued claims hit their highest mark in three weeks, still below the low 1.7mln’s we saw pre-pandemic.
Durable Goods Orders
Durable Goods Orders were down -.9% in December, while orders ex-transportation were up +.4% as expected. Revisions to November were positive, with total orders up from +2.6% to +3.2%, and ex-transportation orders up from +.9% to +1.1%. Within the report for December, shipments were up +.8% for both headline and ex-transportation, while inventories were up +.7% on headline and up +.9% ex-transportation. The inventories/shipments ratios were nearly unchanged at 1.78 and 1.691, respectively. Civilian aircraft orders were significantly lower, while the next largest negative contributors were computers/electronics, defense aircraft, and communication equipment. The largest positive contributions came from motor vehicles, fabricated metals, misc. durables, and primary metals.
Q4 GDP
The first look at Q4 GDP growth had it at +6.9% annualized, posting the fastest headline growth since Q3 2020. Real final sales, however, was only up +1.9% after being basically flat (+.1%) in Q3. In quarter over quarter terms, GDP is up +5.5% and final sales grew +4.7%. The contribution from personal consumption expenditures was +2.25 percentage points, up from Q3’s +1.35, but well below the first half’s average of +7.68. Fixed investment added only +.25, while government consumption subtracted -.51. Net exports added +2.43 but imports took away -2.43. Housing stock remained in high demand, but residential investment contributed a negative -.03 percentage points, which is the third consecutive negative.
New Home Sales
New Home Sales rose +11.9% to 811k annualized in December from a downwardly revised 725k in November (was 744k). The number of new homes for sale rose +6k to 403k, which is the highest level since August 2008 and up from 299k a year prior. With the increase in sales, however, the months’ supply actually fell from 6.6 to 6.0 months, its lowest since May. Prices also took a strong dip, with the median price down -9.2% to $377.7k, its lowest since April and up only +3.4% from a year ago. The average price was down -4.6% last month to $457.3k, with the YoY down from +21.0% to +13.8%. Broken out by region, the Northeast was down -15.6% MoM and -34.1% YoY; the Midwest was up +56.4% MoM and -23.2% YoY; the South +14.9% MoM and -17.5% YoY; and the West +.4% MoM and +2.1% YoY.
