Markets Dig Out of Hole to Finish Higher…..
U.S. equities were able to post gains for the day and avoid a three-day losing streak, as the markets continued to grapple with the implications of the resurging COVID-19 cases and progress on the vaccine front. Investors got a slew of earnings and economic data, with jobless claims unexpectedly accelerating, but reads on Leading Indicators and existing home sales continued strings of monthly gains. On the equity front, NVIDIA’s data center warning overshadowed its upbeat Q3 results, Macy’s posted a smaller-than-expected loss, and Sonos topped forecasts and issued favorable guidance. Treasury yields were lower as bond prices moved higher and the U.S. dollar gained ground, while gold and crude oil prices were lower. Europe finished in the red to trim a recent rally, while markets in Asia were mixed.
The Dow Jones Industrial Average rose 45 points (0.2%) to 29,483, the S&P 500 Index was up 14 points (0.4%) at 3,582, and the Nasdaq Composite increased 103 points (0.9%) to 11,905. In moderate volume, 892 million shares were traded on the NYSE and 3.7 billion shares changed hands on the Nasdaq. WTI crude oil traded $0.11 lower at $41.90 per barrel and wholesale gasoline was unchanged at $1.16 per gallon. Elsewhere, the Bloomberg gold spot price was off $5.55 at $1,866.69 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 92.27.
Jobless claims unexpectedly accelerated, housing and Leading Indicators continued a string of gains. Weekly initial jobless claims came in at a level of 742,000 for the week ended November 14th, above the Bloomberg estimate of 700,000 and the prior week’s upwardly-revised 711,000 level. The four-week moving average declined by 13,750 to 742,000, while continuing claims for the week ended November 7th fell by 429,000 to 6,372,000, below estimates of 6,400,000. The four-week moving average of continuing claims dropped by 525,000 to 7,054,500.
The Conference Board’s Index of Leading Economic Indicators (LEI) for October rose 0.7% month-over-month (m/m), matching September’s unrevised gain and expectations. The LEI has been positive for six-straight months after the plunges in March and April, due to positive contributions from ISM new orders, jobless claims, stock prices, credit conditions and the interest rate spread.
Existing home sales unexpectedly increased in October, rising 4.3% m/m to an annual rate of 6.85 million units—the fifth-straight monthly gain—versus expectations of a decline to 6.47 million units from September’s modestly-revised 6.57 million rate. Existing home sales are up 26.6% y/y.
Each of the four major regions experienced m/m and y/y growth, with the Midwest seeing the greatest monthly increases. Sales of single-family homes and purchases of condominiums and co-ops were up m/m and y/y. The median existing home price was up 15.5% from a year ago to $313,000, marking the 104th straight month of y/y gains as prices rose in every region. Unsold inventory came in at an all-time low of 2.5-months pace at the current sales rate, down from 2.7-months in September and the 3.9-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.
National Association of Realtors Chief Economist Lawrence Yun said, “Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year.” The surge in sales in recent months has now offset the spring market losses, and Yun added that, “With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market’s growth to continue into 2021.”
The Philly Fed Manufacturing Index declined but remained solidly in expansion territory (a reading above zero) for November, decreasing to 26.3 versus estimates of a decline to 22.5 from October’s 32.3 level. New orders, shipments and delivery times all fell but continued to depict expansion, while employment growth accelerated.
The November Kansas City Fed Manufacturing Activity Index dipped but remained at a level depicting expansion (a reading above zero). The index declined to 11 from October’s 13 reading, matching forecasts.
Treasuries rose, as the yield on the 2-year note dipped 1 basis point (bp) to 0.17%, the yield on the 10-year note was 3 bps lower at 0.85%, and the 30-year bond rate decreased 4 bps to 1.58%.
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