Market Matters

The Fed delivered a hawkish surprise by raising the Fed Funds rates 75 bps. They also updated their dot plots for a higher terminal rate and are expecting to keep that terminal rate longer than the market was expecting. The market didn't exactly sell-off until Thursday, and we saw a violent sell-off, in a week where the 10-year and mortgages sold off steadily into the Fed meeting. Best to be careful here, it feels like the market has momentum to keep selling off and the hope here is that when the market calms down we see a rally in our favor.

 

Initial Jobless Claims

Initial Jobless Claims for the week ending September 17th came in at 213k, which is slightly lower than the expectations of 217k, but was higher than the prior week's 208k. The four-week moving average has decreased to 216.75k, down for last week's 222.75k. Continuing claims for the week ending September 10th were at 1.379mm, beating expectations of 1.418mm, and is lower than the prior week's 1.401mm.

 

Leading Economic Indicators

Leading Economic Indicators for August came in -0.3% MoM, which is down from the market expectations of -0.1%. The only positive contributing indicators were initial jobless claims and the yield spread. According to the Conference Board, the labor market is expected to moderate in the coming months, which would show a softening in unemployment. This is the sixth straight month of declines, and analysts consider this a signal of an impending recession.

 

Building Permits

Building Permits for August were down a strong -10.0% to 1.517mln annualized units, while housing starts rebounded up +12.2% to 1.575mln units. July's pace was revised downwardly from 1.446mln to 1.404mln starts, which was the lowest since August 2020. Permits are now at their lowest since August 2020, as well. Jumping back to the August data, 5+ unit starts surged from 483k to 621k, the highest since April 1986, while 5+ unit permits sank from 701k to 571k, the lowest since October 2021. Single-unit starts rose more modestly, from 904k to 935k, which was still the second lowest since June 2020, while single-unit permits slipped from 932k to 899k, the lowest level since June 2020. Overall, the main theme remains well in-tact: that higher interest rates combined with still-high prices are keeping the housing market pinned to weaker results.

 

Philly Fed

The Philly Fed's Nonmanufacturing Business Outlook improved quite significantly in September, with the firm activity level index rising to 19.5 and region-level activity rising to 2.5. Around 43% of respondents reported an increase in activity, while 23% reported declines. The sales/revenue index rose by +20 points to 18.2, with almost 50% of businesses surveyed reporting increases in September. That said, new orders are still muted at -1.1, and prices paid and received both increased to 71 and 72, respectively. Finally, the future activity index suggests that businesses anticipate further expansion and growth. Over 49% of the respondents expected increased activity over the next six months.