Good Morning on this Terrific Thursday,
Strong data today but not unexpected based on the recent employment, retail sales, and inflation data.
Initial Jobless Claims 194K on expectations of 200K, Producer Price Index 0.7 on expectations of 0.4 and the core PPI at 0.5 on expectations of 0.3. The ten-year bond is at 3.83 and has substantial resistance at the 3.90% level. I will not be surprised if we test that level. At the moment, we are hanging onto the Fibonacci 50% level, (which is 3.83%), by a thread. There is no economic release of any significance until the 24th and that is the PCE numbers. PCE is more closely watched by the Fed than CPI, so we need that number to come in nice and low. Until the 24th the charts will have no fundamental interference and will be able to let things play out. I expect a bit worse before things get better on the short term, but we should move sideways overall.
There was a great green shoot for housing yesterday.
The NAHB (Home Builder) Housing Market Index came in at 42 on expectations of 37. Still challenged, but that is the biggest jump on record. Home Builders typically know what is happening in housing before the broader market does.
Investors bought fewer homes last quarter than they have in years, extending a retreat that has coincided with the pullback by conventional buyers stymied by higher mortgage rates. Real-estate firm Redfin said large and small businesses purchased 48,445 homes in the last three months of 2022, a 46% decrease from the same quarter a year prior and the second straight quarter of large declines. Now, higher borrowing costs and volatile home values have deterred companies from buying as many homes. For investors turning homes into rentals, slowing rent growth also means lower rates of return.
Speaking of retail sales, which jumped 3%, here is a great graphic on where those biggest gains happened.
Some businesses are winning (pun intended)…
Gambling in the U.S. reached a record high last year as commercial casinos and online betting apps reaped more than $60 billion in gambling revenues, an industry trade group said Wednesday. Commercial-gambling revenue last year broke the previous record of $53 billion set in 2021, increasing about 14% year-over-year, according to an American Gaming Association report. The figures don’t include tens of billions of dollars in revenue generated by tribal-owned casinos.
Last, From Bloomberg:
Earlier in the week I wrote about how housing is the one sector of the economy which can be unambiguously described as “rate sensitive,” given the importance of mortgages. Anyway, housing definitely slowed down last year big time, with activity resembling something of a freeze. Less construction. Less buying. Very little forced selling. There do seem to be signs that housing is recovering, or at least stabilizing, and here’s another way to see that. For the first time since last spring, the Bloomberg economic surprise index for housing and real estate just went positive. In other words, for the first time since last April, housing data is, on net, coming in better than economists are forecasting. And so again, this raises the question: If you anticipate a recession imminently, you have to answer how that’s going to happen when the most rate-sensitive area of the economy is once again performing better than economists expect.
Please remain safe and stay healthy, make today great!