10-Year Treasury Yield
The 10-year U.S. Treasury yield was higher Monday as investors assessed the growth outlook following the Federal Reserve’s jumbo rate cut last week. The 10-year Treasury yield was up less than 1 basis point at 3.736%. The yield on the 2-year Treasury note was flat at 3.574%.
Chicago Fed National Actvity Index
US Stocks Edge Higher; Chicago Fed National Activity Increases In August. US Stocks Edge Higher; Chicago Fed National Activity Increases In August 2024. The Chicago Fed National Activity Index rose to +0.12 in August versus a revised reading of -0.42 in the previous month and better than market expectations of -0.20.
PMI Composite Flash
U.S. PMI Composite Flash slips less than expected in September 2024. The S&P Global U.S. PMI Composite edged down to 54.4 in September's preliminary estimate, vs. 54.3 consensus, from 54.6 in August 2024.
Case Shiller Index
Home prices grew at the slowest pace in 8 months, Case Shiller says, but still inch up to new record high. Major real-estate markets are seeing home-price rises slow, S&P says. Home prices in the 20 biggest U.S. metro areas set yet another record high in July, but the pace of price rises has decelerated significantly as prices and mortgage rates weigh on home buyers. The S&P CoreLogic Case-Shiller 20-city house-price index rose 0.3% in July compared to the previous month. Case-Shiller Home Prices Tick in Lower Than Expectations. Case-Shiller Home Prices Increase, but Miss Estimates The definitive measure on home prices is the Case-Shiller index, reported a month in arrears from most other housing data (in this case, July). Overall, we see +5% growth in home price data for mid-summer, but this is lower than the +6% analysts had been expecting, and below the downwardly revised +5.5% the previous month. Breaking the findings down into the two separate indexes, the 10-city survey saw home prices up +6.8% for July, +5.9% on the 20-city. Among region leaders, New York led the way that month: +8.8%, followed by Las Vegas at +8.2%. Of course, this data is still well within the high mortgage rate environment that we see coming down rather rapidly, looking ahead. With a lowering Fed funds rate, this will establish lower mortgage rates over time. Considering pent-up demand over the past couple years of high mortgage rates, we may also expect to see more activity in the Existing Home Sales space, which may put pressure on new homebuilders.
FHFA House Price Index
FHFA House Price Index Up 0.1 Percent in July; Up 4.5 Percent from Last Year. U.S. house prices rose 0.1 percent in July, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI®). House prices rose 4.5 percent from July 2023 to July 2024. The previously reported 0.1 percent price decrease in June was revised upward to 0.0 percent. For the nine census divisions, seasonally adjusted monthly price changes from June 2024 to July 2024 ranged from -0.7 percent in the South Atlantic division to +0.9 percent in the East North Central and New England divisions. The 12-month changes were all positive, ranging from +1.6 percent in the West South Central division to +7.5 percent in the East North Central division. For the third consecutive month U.S. house prices showed little movement.
Consumer Confidence
September consumer confidence falls the most in three years. The Conference Board’s consumer confidence index slid to 98.7, down from 105.6 in August, the biggest one-month decline since August 2021. Consumers’ view on the economy tumbled in September, falling by the largest level in more than three years as fears grew about jobs and business conditions, the Conference Board reported Tuesday. The board’s consumer confidence index slid to 98.7, down from 105.6 in August, the biggest one-month decline since August 2021. The Dow Jones consensus forecast was for a reading of 104. By contrast, the index had a reading of 132.6 in February 2020, a month before the Covid pandemic hit.
Money Supply
U.S. M2 Money Supply Approaches New Highs as Financial Assets Reach Record Levels. In August alone, the M2 money supply rose nearly 1%, and the Fed since has trimmed interest rates 50 basis points, with what looks like another 50 basis point rate cut coming in November. Aggressive monetary easing by China and the U.S. Federal Reserve has driven asset price increases, with cryptocurrencies leading the charge since the recent FOMC meeting. The growth of the M2 money supply, with a CAGR of 7% in the past five years, has been closely linked to the performance of the S&P 500 and other assets, underscoring the critical role of liquidity in driving market performance.
The M2 money supply in the United States rose by $29.3 billion from the previous month to $21.054 trillion in July 2024, the highest in 17 months. Money Supply M2 in the United States averaged 5326.09 USD Billion from 1959 until 2024, reaching an all time high of 21722.30 USD Billion in April of 2022 and a record low of 286.60 USD Billion in January of 1959. source: Federal Reserve
Geopolitical Risk
Thousands flee as at least 558 people have died; IDF claims to have killed a senior Hezbollah commander during strikes targeting the militant group. Israel targets Hezbollah commander in Beirut suburbs. Lebanese health ministry says six killed in attack. Fears of a wider conflict are growing.
MBA Purchase Applications
Mortgage applications increased 11.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending September 20, 2024. The Market Composite Index, a measure of mortgage loan application volume, increased 11.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 11 percent compared with the previous week. The Refinance Index increased 20% from the previous week and was 175 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.4 percent compared with the previous week and was 2 percent higher than the same week one year ago. Mortgage applications increased to their highest level since July 2022, boosted by a 20 percent increase in refinance applications after a large increase the prior week. The 30-year fixed rate decreased for the eighth straight week to 6.13 percent, while the FHA rate decreased to 5.99 percent, breaking the psychologically important 6 percent level.
New Home Sales
Sales of new single‐family houses came in at a seasonally adjusted annual rate of 716,000 in August 2024, data from the United States Census Bureau and the Department of Housing and Urban Development showed on Wednesday. Month on month, the figure tumbled 4.7%. On an annual level, however, the reading jumped 9.8%. In August, the median sales price of new houses sold amounted to $420,600, while the average sales price came in at $492,700. The seasonally-adjusted estimate of new houses for sale at the end of June stood at 467,000, translating to a 7.8-month supply at the current rate of sales.
Oil - Commodity
Oil prices experienced a slight decline on Wednesday, as investors remained skeptical of China’s recently announced stimulus efforts, while ongoing tensions in the Middle East continue to pose significant concerns. The price of North Sea Brent crude for November delivery fell by 0.73% to $74.62 per barrel. Meanwhile, its American counterpart, West Texas Intermediate (WTI), for the same month, decreased by 0.81% to $70.58 per barrel.
Jobless Claims
Data from the US Labor Department released Thursday showed 218,000 unemployment claims were filed in the week ending Sept. 21, below Wall Street's expectations for 223,000. This marked the lowest level of weekly claims since the middle of May.
Real GDP
Thursday's reading on GDP is considered backward looking given it's an update to economic growth for a quarter that ended in June. But projections show the economy has been growing at a steady pace in the third quarter, which ends in September. The US economy grew at a 3% annualized pace in the second quarter, a faster rate than Wall Street had expected. The Bureau of Economic Analysis's third estimate of second quarter US gross domestic product (GDP) was unchanged from the second estimate which had shown 3% annualized growth. Economists had estimated the reading to show annualized growth of 2.9%. The third estimate for second quarter GDP confirms that economic growth was higher than the 1.4% annualized growth seen in the first quarter.
Durable Goods Orders
Durable-goods orders were flat in August, beating forecasts of a sharp decline. Orders flat vs expectations of a 3% decline. Orders for U.S. durable goods were flat in August, the Commerce Department said Thursday. The result was much better than anticipated. Economists had forecast a 3% fall in orders for durable goods — products made to last at least three years. New orders for U.S. manufactured durable goods were virtually unchanged in the month of August, according to a report released by the Commerce Department on Thursday. The Commerce Department said durable goods orders came in flat in August after soaring by 9.9 percent in July. Economists had expected durable goods orders to tumble by 2.6 percent.
Corporate Profits
US economic growth, corporate profits revised higher in 2023. The U.S. economy grew faster than initially thought in 2023 amid upgrades to business investment and consumer spending despite hefty interest rate increases from the Federal Reserve, revised government data showed on Thursday. The annual benchmark revision from the Commerce Department's Bureau of Economic Analysis (BEA), the government agency that constructs the gross domestic product report, also showed a sharp upward revision to corporate profits last year. Revisions to inflation were minor, while the saving rate was raised. Corporate profits were sharply revised up by $288.5 billion, or 8.9%, in 2023. Companies have enjoyed greater pricing power amid rising inflation. The upbeat outlook on the economy was underscored by other data today showing corporate profits increased at a more robust pace than initially thought in the second quarter. Strong profit growth should help to underpin the labor market and potentially shield the economy from a recession. The economy’s resilience could make it harder for the Federal Reserve to deliver another 50 basis points interest rate cut in November as some investors are hoping. corporate profits including inventory valuation and capital consumption adjustments increased at a $132.5 billion annualized rate in the second quarter. They were revised up from the $57.6 billion pace estimated last month.The revision reflected a sharp upgrade to domestic profits of nonfinancial corporations, which are now estimated to have increased $108.8 billion, instead of $29.2 billion. Income at the disposal of households was also solid. As a result, gross domestic income growth, which measures economic activity from the income side, was revised up to a 3.4% rate last quarter from the initially estimated 1.3% pace.
Pending Home Sales
US pending home sales hover near record low in August 2024. Contracts to buy U.S. previously owned homes edged up in August from July's record-low level as a drop in mortgage interest rates in anticipation of Federal Reserve benchmark rate cuts provided a modest lift to affordability. The National Association of Realtors (NAR) said on Thursday its Pending Home Sales Index, based on signed contracts, rose 0.6% last month to 70.6 from July's 70.2, which was the lowest reading since the series started in 2001. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would rise 1.0%. On a regional basis, pending home sales rose in the West, South and Midwest, while falling in the Northeast. The year-over-year change in the national sales rate remained negative, however, declining 3.0% from August 2023.
Fed Balance Sheet
The Fed has been scaling back its balance sheet--reducing its holdings of Treasury bonds and mortgage-backed securities--since the summer of 2022. Instead of reinvesting the proceeds as some of that debt matures, the bank is holding onto the money, a process that has the effect of raising long-term rates by a small margin because it removes liquidity from the financial system.
Mortgage Rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.13% from 6.15%, with points increasing to 0.57 from 0.56 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $766,550) increased to 6.47 percent from 6.41 percent, with points decreasing to 0.50 from 0.55 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 5.99 percent from 6.12 percent, with points decreasing to 0.79 from 0.81 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
International Trade - Goods
Goods trade deficit narrows 8.3% to $94.3 billion. A report from the Commerce Department's Census Bureau on Friday showed the goods trade deficit contracted $8.6 billion, or 8.3%, in August to $94.3 billion. The dollar amount drop was the largest since November 2022. The decline in the deficit reflected a 1.6% fall in imports, mostly industrial supplies and motor vehicles. Goods exports increased 2.4%, boosted by consumer goods, other goods and motor vehicles. Wholesale inventories rose 0.2%, while stocks at retailers advanced 0.5%. Inventories are expected to erase the anticipated small dent on GDP from trade.
Personal Income
Personal Income rose 0.2% in August 2024 amid decreases in personal interest and personal dividend income. Personal income increased 0.2% on the month while spending rose 0.2%. The respective estimates were for increases of 0.4% and 0.3%. Stock market futures were positive following the report while Treasury yields were negative. The readings come a little more than a week after the Fed took down its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5%.
Consumer Spending
U.S. consumer spending increased slightly less than expected in August 2024, but that did little to change expectations that solid economic growth persisted in the third quarter, while the annual rise in prices was the smallest in just over 3-1/2 years.
The progress in August came despite continued pressure from housing-related costs, which increased 0.5% on the month for the largest move since January. Services prices overall rose 0.2% while goods declined by 0.2%. Personal income increased 0.2% on the month while spending rose 0.2%. The respective estimates were for increases of 0.4% and 0.3%. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2% last month after an unrevised 0.5% gain in July, the Commerce Department's Bureau of Economic Analysis said. Economists polled by Reuters had forecast consumer spending climbing 0.3%.
Core PCE
Excluding food and energy, core PCE rose 0.1% in August 2024 and was up 2.7% from a year ago, the 12-month number 0.1 percentage point higher than July. Fed officials tend to focus more on core as a better measure of long-run trends. The respective forecasts were for 0.2% and 2.7% on core. Key Fed inflation gauge at 2.2% in August, lower than expected. The PCE price index, a measure the Fed focuses on to measure the cost of goods and services in the U.S. economy, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%. Excluding food and energy, core PCE rose 0.1% in August and was up 2.7% from a year ago. The all-items inflation gauge was below Wall Street estimates and the lowest since early 2021.
Retail Inventories (Adv)
Retail inventories for August 2024 were $816.0 billion, up 0.5% from July 2024 and up 6.3% from August 2023. The June to July 2024 retail inventories change remained unchanged at 0.8%.
Wholesale Inventories (Adv)
US wholesale inventories advanced for August 0.2% versus 0.3%. Prior month 0.3% Wholesale inventories for August 2024 were $905.7 billion, up 0.2% from July 2024 and up 0.7% from August 2023. The June to July 2024 wholesale inventories change was revised from 0.2% to 0.3%.
Consumer Sentiment UM
Consumer Sentiment Rises Amid Cooling Inflation. The Michigan Consumer Sentiment Index increased to finish September at 70.1, its highest level since April. Inflation expectations fell again as the survey showed that consumers were noticing the slow down in the inflation rate. Economists were expecting a more modest increase in the Michigan survey, which stands in contrast to the similar consumer confidence survey that declined this month on labor worries.
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