With the shortened holiday week, we saw what seemed to be a data dump on Tuesday and Wednesday. The 10-year moved back to the trading range we have been seeing between 0.85% and 0.973% and it appears that is the range we are in until there is a large enough event to push the market out of the range. Most people appear to still think that rates will be moving higher eventually. There may be a few events that would push rates lower such as the Fed being more aggressive or an issue with one of the vaccines, or something else with the virus that the markets have not anticipated.
Initial Jobless Claims
Initial Jobless Claims for the week ending November 21st rose by +30k to 778k from the prior week’s upwardly revised print of 748k (orig. 742k). This is the first instance of consecutive weekly increases in claims since the week of July 25th. Continuing claims, which lag a week, fell 299K to 6.071mln from 6.370mln, making another new pandemic-era low. Continuing claims have now fallen in each week except for 2 since July 18th. Since that time, they have fallen a total of 10.880mln. However, the 299K decline this week is the smallest since September 12th, and it’s expected that weekly declines will continue to come in smaller and smaller on continuing claims, as Covid-19 related factors start to work in as they look to have already done on the headlines reads.
Durable Goods Orders
Durable Goods Orders rose by +1.3% in October after an upwardly revised +2.1% monthly gain in September. The October gain was entirely driven by non-transportation orders, which increased by +1.3% as well. Tech products drove some strength, particularly communications equipment orders which rose +8.3%. Industrial products posted a net gain, with strength in fabricated metals was partly offset by weakness in machinery orders. Transportation was basically a wash as improving aircraft orders, both defense and nondefense, were offset by weakness in motor vehicle orders. Looking at an annualized basis, core capex orders were up +32.3% in October, and shipments were up +27%, suggesting that equipment spending is still on track to make a solid positive contribution to Q4 GDP growth.
Case-Shiller Home Price Index
According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index, values rose by +7% in September on an annual basis, up from the +5.8% increase back in August. This is now the largest gain since September 2014, and prices are roughly +23% higher than their last peak back in 2006. The 10-city composite index was up +6.2% YoY, up from +4.9% in the prior month. The 20-city composite posted a +6.6% annual increase, up from a prior +5.3%. Phoenix, Seattle and San Diego continued to see the highest annual gains among the 19 cities (excluding Detroit) in September. Home prices in Phoenix rose +11.4% YoY, followed by Seattle with a +10.1% increase, and San Diego with a +9.5% increase. Dallas and New York saw the smallest annual gains but were still up in the +4% range compared with September 2019. All 19 cities reported higher price increases in the year ended September 2020 versus the year ended August 2020.
Consumer Confidence Index
The Consumer Confidence Index fell to 96.1 in November from an upwardly revised 106.2 in October. The headline print today came in below the market consensus of 98.0. Within the details, the decline was entirely concentrated in the expectations index, which fell sharply to 89.5 from 98.2, the lowest since August. The present situation index, however, held steady at a stronger level of 105.9. This would have been an increase on the month, had the October data not been revised up from 104.6 to 106.2. Looking within the report, responses regarding the labor market continued to show improvement since the Summer months. In November, 26.7% of consumers said that jobs were “plentiful”, which is the same as the upwardly revised reading from October. Those responses saying jobs were “hard to get” fell to 19.5% from a downwardly revised 19.6%.
We feel bearish on the market as the 10-year is at 0.865%. We have resistance at 0.85%, while we have support at 0.973%, then at 1.114 %. Best to be defensive with your pipelines and get your loans locked in.
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