Up and to the right!

The major averages closed another positive week. The Dow Jones rose by 230 points or 0.55%, the NASDAQ gained 172 points or 0.96%, and the S&P 500 increased by 35 points or 0.61%. Up and to the right! This week was highlighted by generally positive economic data and continued declines in inflation and interest rates, although real estate continues to struggle.

Up and to the right!

Thanks to WolfStreet for the chart.

Newly completed home inventory surged by 46% from a year ago to 104,000 units in August, reaching a nearly 15-year high, according to the Census Bureau. This increase pushed the new home inventory for sale to 470,000 units, or an 8.2-month supply at the current sales pace. Up and to the right! This figure is expected to put downward pressure on prices, which fell by 4.6% from a year ago in August, more than doubling the price decline from the peak recorded in October 2022 to 8.8%. This is before factoring in builder incentives. According to Lennar’s 2Q results, these incentives average $47,100 per house. These attention-grabbing numbers are coming off record lows. I still believe that the Covid Era froth is being unwound, rather than something more sinister.

Historically, rates often rise slightly before starting a steady Fed-led decline within 30-90 days of rate cuts. Keep an eye on employment; we need at least 150,000 new jobs per month to keep up with population trends. Recent revisions have pushed job growth below this figure. GDP or economic growth is another significant factor, with the latest estimates for 3rd quarter growth running at 2-3%, showing an improving trend.

Inflation is generally continuing to drift lower, though some stickiness remains in services. Year-ago data on energy, food, and to a lesser extent core prices, show continued moderation as inflation approaches the Fed’s desired 2% target.

Inflation Close to Fed Target

Thanks to Bloomberg for the chart.

I’ll close this week with an interesting market factoid that crossed my desk. Nearly all the market gains this year have come from after-hours institutional trading. If you bought SPY at the close every day and sold at the open, you would have gained 13.8% through September 13. Up and to the right! Conversely, if you bought at the open and sold at the close, you would have netted just 3.3%. Things do go “bump” in the night.

That’s all for this week folks, I’ll be back October 4th.

Best, Caleb

Last Week’s Post: Sept 20, 2024

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