Housing, ISM & Initial Claims Data Takeaways

The Dow and S&P 500 are slightly down today as Biden starts his Presidency. Every election brings winners and losers. We will be watching Biden and Congress closely to help readers navigate the markets.

On a positive note, today’s U.S. reports revealed robust figures for December housing starts and the January Philly Fed index, while the claims figures remained elevated with a likely lift from the typical NSA rise into January alongside seasonal adjustment difficulties, combined with a filing surge with the new stimulus package.

The housing data set an array of lofty new 13-14 year highs for starts, permits, starts under construction, and completions.

The Philly Fed index surged to an 11-month high of 26.5, while the ISM-adjusted measure rose to a 3-year high of 61.6. We saw only a small initial claims pull-back of -26k to 900k, though the prior week surge was trimmed, alongside a continuing claims drop of -127k to 5,054k that is in line with our 100k January nonfarm payroll estimate.

Key Points:

  • Housing starts rose 5.8% to a 14-year high pace of 1.669 mln in December after 33k in revisions, leaving a 5.2% y/y gain.
  • Housing permits rose 4.5% to a 14-year high of 1.709 mln from 1.635 mln in November, leaving a 17.3% y/y rise.
  • Housing completions bounced 15.9% to a 13-year high pace of 1.417 mln after 80k in revisions, leaving an 8.0% y/y gain.
  • Starts under construction rose 1.6% to a 14-year high 1.271 mln in December after -8k in revisions, leaving a 7.4% y/y rise.
  • The Philly Fed rose 17.4 points to an 11-month high of 26.5 in January from 9.1 (was 11.1).
  • The ISM-adjusted Philly Fed bounced 6.7 points to a 3-year high of 61.6 from 54.9 (was 55.9), versus a 2-year high of 60.0 (was 62.6) in October.
  • Initial claims fell -26k to 900k from 926k (was 965k).
  • Continuing claims fell -127k to 5,054k from 5,181k (was 5,271k).
  • The insured jobless rate fell to 3.6% (was 3.7%) in the last two weeks from a 3.5% low in the prior two weeks.
  • The weekly Bloomberg consumer comfort index bounced to 43.7 from 43.2, versus a 46.8 average in December.

All things considered, we are still in a BULL market and expect it to continue for the next couple of months, especially if a new Covid-19 stimulus bill passes.

However, there are several things that the Democrats have said they will pass that could adversely affect the markets and we could be looking at a major increase in inflation that will destroy the bull market.

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