If you celebrate, have a great Christmas with your family. //www.youtube.com/watch?v=4riW8XnT0PI
Updated market sentiment numbers:
II: Bulls 62.4 vs 63.6, Bears 16.8 vs 17.2 – still extreme bullishness with Bulls above 60 and the spread above 40. AAII: Bulls 43.6 vs 43.4, Bears 22 vs 26.3 (lowest level since January 2nd)
Succinct Summation of the Week’s Events:
Positives
1)A Brexit deal is finally here!?
2)Initial jobless claims fell to 803k from 892k and that was about 80k less than expected. The 4 week average though was little changed at 818k vs 814k in the week prior. Pandemic Unemployment Assistance fell to 398k people from 454k. Delayed by a week, continuing claims fell again to 5.34mm from 5.51mm and below the forecast of 5.56mm. Those receiving continuing Pandemic Emergency Unemployment Compensation was little changed, down by 8k w/o/w to a still high 4.79mm. The level of PUA continuing claims rose by 27k to 9.27mm. So, 19.4mm are still receiving continuing claims of some sort.
3)Core durable goods orders rose .4% m/o/m in November, two tenths less than expected but more than offset by an 8 tenths upward revision to October to a 1.6% increase. The y/o/y increase was 7.4% with a comparison of tariffs hurting manufacturing last year. Core shipments were about as expected.
4)The November PCE inflation deflator both headline and core were flat m/o/m and each one tenth less than expected. Versus last year the y/o/y headline gain was 1.1% and the core rate was higher by 1.4%. That core rate was as expected due to rounding and unchanged with October.
5)The December Richmond manufacturing index rose 4 pts m/o/m to 19 and that was 8 pts above the estimate and vs 29 in October. The six month outlook though moderated.
6)The MBA said refi’s rose 3.8% w/o/w and 124% y/o/y.
7)Taiwan said November exports spiked by 30% y/o/y, more than double the estimate of up 14%. Tech exports led the way around the holiday season.
8)South Korea said in the 1st 20 days in December its exports rose 1.2% y/o/y vs a gain of 11.1% in November. Average daily shipments were up by 4.5% as there was one less business day this year in December. Imports though fell by 8% y/o/y after rising by 1.3% last month.
9)Singapore’s industrial production figure for November jumped 7.2% m/o/m and 18% y/o/y, both above expectations. Biomedical and electronics were the main reasons for the upside.
10)Italian economic sentiment for December went from 83.3 to 87.7 led by manufacturing and services. But we still saw m/o/m declines in construction and retail confidence.
11)The GFK German consumer confidence index softened to -7.3 from -6.8 but that was a bit better than the estimate of -7.6.
Negatives
1)New home sales in November totaled 841k, well below the estimate of 995k and down from 999k in October. Inventories rose by 5k homes and with the sales drop brought months’ supply to 4.1 from 3.6. The median home price, very volatile month to month because of mix, rose 2.2% y/o/y. We need more new homes, particularly in the lower end price point.
2)Existing home sales in November, likely reflecting contract signings mostly in the August thru October time frame, totaled 6.69mm, as expected and vs 6.86mm in October which was left essentially unrevised. Inventories remain a problem as months’ supply fell to just 2.3 from 2.5. Around 6 is the long term average. BUT, keep in mind that homes for sale always drop in the last few months of the year as people are more focused on the holiday’s. As a result of lean inventories and juiced by low mortgage rates, the median home price rose 14.6% y/o/y. As a lot of this is mix, assume prices are rising between 6-8%. The 1st time home buyer bought 32% of all the purchases, the same pace as in October and still below the long term average of around 40%. All cash buyers took down 20% of all purchases, matching the most since January. The NAR said “Housing affordability, which had greatly benefited from falling mortgage rates, are now being challenged due to record high home prices. That could place strain on some potential consumers, particularly first time buyers.”
3)Impacted by the holiday’s where activity normally slows and the seasonal adjustments don’t capture it well, the MBA said purchase applications to buy a home fell 4.6% w/o/w but they are still up a strong 26% y/o/y.
4)The final December UoM consumer confidence index was 80.7 vs the initial print of 81.4 and a touch below the estimate of 81.1. That compares with 76.9 in November and 81.8 in October. One year inflation expectations fell to 2.5% from 2.8% in November but that is two tenths above the 1st December read. As I stated in the analysis of the preliminary UoM report a few weeks ago, politics completely divided the answers to the questions on business and one’s personal finances. Democrats are the most confident since October 2016 and the Republicans are the least confident since then.
5)The December Conference Board Consumer Confidence index fell to 88.6 from 96.1 and that is well below the estimate of a slight uptick to 97. This is the lowest print since August with most of the moderation in the Current Conditions component which was down by 15.6 pts m/o/m. Expectations, thanks to a downward revision to November, was higher by 3.2 pts. One yr inflation expectations rose two tenths m/o/m to 5.9%, a 5 month high and compares with the 10 yr average of 5.1%. The real disappointment within the numbers was the answers to the labor market questions. Those that said jobs were Plentiful fell 4.5 pts to a 4 month low. Those that said jobs were Hard To Get rose 2.6 pts to a 4 month high. Spending intentions were mixed.
6)Personal income in November disappointed with a 1.1% m/o/m drop vs the estimate of just a .3% fall. A lot of this remains the fall in transfer payments. Importantly, private sector wages/salaries rose .5% m/o/m and 2.8% y/o/y.
7)Spending fell .4% m/o/m, two tenths more than expected and October was revised lower by 2 tenths. Thus, we might get a trim in Q4 GDP estimates. Spending on both services and durable goods fell from October but with the latter still up solidly y/o/y as people have shifted their spending as we know and the former down sharply.
8)As a result of the data points in #6 and 7 above, the savings rate fell to 12.9% from 13.6% but this will hook back up again after the newly minted transfer payments get sent out.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.