The trading range that we have seen for the last couple of weeks of 1.5%-1.68% has been broken, as the 10-year has touched 1.451% on Friday due to worsening reports on the coronavirus. The US 30-year treasury has also hit its new low on Friday, touching 1.89%. Fears of the coronavirus spreading has led to the risk-off sentiment the market has seen on Thursday and Friday. There are over 77,000 cases worldwide, with over 2,200 deaths as of Friday. Until the markets and worldwide consensus feels better that the coronavirus is contained, we would see the continued risk-off sentiment.
Empire Manufacturing Index
Empire Manufacturing rose to 12.9 in February. Business activity picked up in New York State, according to firms responding to the February 2020 Empire State Manufacturing Survey. The headline general business conditions index moved up eight points to 12.9. The new orders index shot up 16 points to 22.1, and the shipments index climbed to 18.9. Delivery times lengthened, and inventories increased significantly. Employment expanded only modestly, and the average workweek was little changed.
NAHB Housing Market Index
The NAHB Housing Market Index fell to 74 in February versus 75 in January. The NAHB FEB Index of current single-family home declined 80 versus 81 in January. The NAHB FEB Index of Home Sales decreased over the next six months to 79 versus 80 in January. The NAHB FEB Index of Prospective Buyers went down to 57 versus 58 in January. Builder confidence takes a modest dip in February. Buoyed by a strong economy and inventory shortage, homebuilder optimism remains high.
Housing starts dropped 3.6% to a seasonally adjusted annual rate of 1.567 million units last month, that followed three straight monthly increases. U.S. homebuilding fell less than expected in January while permits surged to a near 13-year high, pointing to sustained housing market strength amid lower mortgage rates. Building permits soared 9.2% to a rate of 1.551 million units in January, the highest level since March 2007, lifted by gains in both single- and multi-family housing segments. The housing market remains on solid footing, supported by the lowest mortgage rates in more than three years. Though housing accounts for about 3.1% of gross domestic product, it has a giant footprint on the economy.
Philly Fed Index
The Philly Fed headline manufacturing index shot higher by +19.7 points to +36.7 versus expectations of a decline back to around a +12 print. This is now the best headline number since February 2017 and the best monthly increase since back in June 2009. Optimism remains high with new orders up +15.4 points to +33.6, prices received higher by +2.4 to 17.1, and prices paid lower by -5.7 to 16.4. From the two regional surveys’ results, that of Philly and New York, it doesn’t appear that any supply chains have been disrupted thus far due to the coronavirus, which is a bit surprising.