MARKET UPDATE: HOUSING STARTS AND BUILDING PERMITS, S&P FLASH US MANUFACTURING AND SERVICES PMI, CONSUMER SENTIMENT

What We Are Watching This Week

• Durable Goods Orders
• US GDP
• Personal Consumption Expenditures

Highlights From Last Week 

• Housing Starts and Building Permits
• S&P Flash US Manufacturing and Services PMI
• Consumer Sentiment

Major stock indexes ended the week higher, recovering some losses from the previous week despite lingering uncertainty over the incoming Trump administration’s policies and heightened geopolitical tensions stemming from the Russia-Ukraine conflict. Gains were broad-based, with smaller-cap indexes outperforming large-caps and the equal-weighted S&P 500 Index surpassing its capitalization-weighted version. Bitcoin extended its postelection rally, marking its third consecutive week of double-digit gains, exceeding 10%. A light economic calendar shifted attention to NVIDIA’s third-quarter earnings, released on Wednesday. While the chipmaker’s results met investor expectations, its softer-than-expected fourth-quarter guidance left shares largely unchanged by week’s end. Commentary from NVIDIA’s call boosted optimism around artificial intelligence-driven demand for clean energy, contributing to the utilities sector’s strong performance. In contrast, the communication services sector underperformed, weighed down by a decline in Alphabet shares. Reports of a Justice Department proposal to break up the Google parent company added pressure to the sector. The market showed resilience amid mixed headlines, with broad-based gains highlighting investor confidence in key sectors.

Canada’s largest stock market surged to record highs on Friday, driven by strength in industrial and resource sectors. The Canadian dollar edged up slightly, rising 0.02 cents to 71.54 cents US. On the economic front, Statistics Canada reported a 0.4% decline in the new housing price index for October, marking the largest monthly drop since April 2009. Regionally, prices fell in 9 out of 27 census metropolitan areas (CMAs), remained unchanged in 11, and rose in 7 CMAs. Inflation data showed the Consumer Price Index (CPI) increasing 2.0% year-over-year in October, up from 1.6% in September, as gasoline prices declined more modestly in October (-4.0%) compared to September (-10.7%). Excluding gasoline, the all-items CPI rose 2.2%, maintaining the same pace as in August and September. Good prices were up 0.1% year-over-year in October, recovering from a 1.0% decline in September. Meanwhile, service prices decelerated, rising 3.6%, the smallest annual increase since January 2022. Over the past three years, goods prices have risen 10.2%, while service prices increased 14.2%. On a monthly basis, the CPI grew 0.4% in October, reversing the same-sized decline in September. Seasonally adjusted, the CPI rose 0.3% in October.

The pan-European STOXX Europe 600 Index rose 1.06% in local currency terms, buoyed by expectations that the European Central Bank (ECB) might lower borrowing costs in December following purchasing managers’ surveys indicating a weakening economic outlook. Performance among major stock indexes was mixed. Italy’s FTSE MIB saw a significant decline of 2.04%, while France’s CAC 40 Index edged down 0.20%. In contrast, Germany’s DAX posted a modest gain of 0.58%, and the UK’s FTSE 100 Index led with a robust 2.46% increase.

On Tuesday, the US Census Bureau reported US housing starts experienced a decline in October, falling 3.1% to an annualized pace of 1.31 million units, marking the lowest level since July and falling short of Wall Street’s forecast of 1.34 million. New-home construction was down 4% compared to a year ago, driven by a significant 6.9% drop in single-family home starts. In contrast, multi-family construction showed strength, rising 9.8%. Building permits, a leading indicator of future activity, slipped 0.6% to 1.42 million, with single-family permits edging up 0.5% and multi-family permits decreasing 3%. Rising mortgage rates played a major role in the slowdown. Rates climbed from 6.12% at the start of October to 6.72% by month’s end, increasing borrowing costs and dampening demand for single-family homes. Regional disparities were evident, with construction activity surging in the West (+21%) and Midwest (+9%) but declining sharply in the Northeast (-33%) and South (-9%), where disruptions from Hurricane Milton likely compounded challenges. Despite these setbacks, builders remain optimistic about the months ahead. Expectations of lower mortgage rates and potential regulatory relief have boosted confidence, with builder sentiment reaching a seven-month high. A rebound in new-home sales is also providing support. Economists anticipate a partial recovery in housing starts in November, with an annualized peak of 1.08 million units projected by late 2025, suggesting a gradual improvement in market conditions.¹

On Thursday, the US Labor Department reported that for the week ending November 16, seasonally adjusted initial jobless claims fell to 213,000, a decrease of 6,000 from the prior week’s revised figure. The previous week’s claims were adjusted upward by 2,000, from 217,000 to 219,000. The 4-week moving average declined to 217,750, down by 3,750 from the prior week’s revised average, which was revised upward by 500 to 221,500. The total number of continued claims across all benefit programs for the week ending November 2 rose slightly to 1,675,092, an increase of 1,904 from the prior week. For comparison, 1,603,708 claims were filed during the same week in 2023.²

Existing home sales in the US showed positive momentum in October, rising 3.4% from the prior month to an annualized rate of 3.96 million units, according to the National Association of REALTORS (NAR). This represents a 2.9% year-over-year increase, with gains observed across all four major regions. Sales in the Midwest, South, and West grew year-over-year, while the Northeast remained flat. NAR Chief Economist Lawrence Yun expressed optimism that the housing market downturn may be ending, citing increasing inventory and economic growth as key drivers of demand. However, elevated mortgage rates, averaging 6.78% in mid-November, continue challenging affordability, especially for first-time buyers. Housing inventory increased slightly by 0.7% from September to 1.37 million units, a 19.1% rise from the previous year. Unsold inventory represented a 4.2-month supply compared to 3.6 months a year ago. The median existing home price climbed 4% year-over-year to $407,200, with price gains across all regions. Single-family home sales led the way, rising 3.5% month-over-month and 4.1% year-over-year, with a median price of $412,200. Condominium and co-op sales increased 2.7% monthly but fell 7.3% annually. Regional highlights included strong sales growth in the Midwest (+6.7%) and South (+2.9%), while the West saw an 8.5% annual sales surge. First-time buyers accounted for 27% of transactions, while cash sales comprised 27%. Yun predicts inventory growth and homebuilding activity will moderate price increases in 2025, with market stabilization supported by builder confidence and steady demand.³

US leading economic indicators declined for the eighth month in October, yet the four-year-long expansion remains robust. According to the Conference Board, the leading index fell 0.3% last month, driven by higher jobless claims, decreased building permits, and a drop in manufacturing orders. Historically a reliable gauge of economic health, the index has become less predictive in the post-pandemic era. Despite consistent monthly declines since early 2022, the economy has continued to grow at a strong pace, prompting economists to place less emphasis on the report. In October, seven of the ten index components showed negative trends; one was unchanged, and two improved. Big picture: The US economy has demonstrated remarkable resilience, maintaining steady growth over the past two years despite challenges such as higher interest rates and persistent inflation. The short-term outlook remains positive, with no immediate signs of trouble for the ongoing expansion.⁴

The US economy gained momentum in November, setting the stage for another strong quarter of growth. Optimism surrounding falling interest rates and the anticipated pro-business policies of the incoming Trump administration fueled this acceleration. The S&P US Services PMI rose to 57.0, a 32-month high, from 55.0 in October. This key service sector measure, which employs most Americans and includes industries like banking, retail, and restaurants, indicated robust expansion. In contrast, the manufacturing PMI remained in contraction at 48.8, reflecting the sector’s diminished economic role. Key findings included:

• A sharp rise in new orders.
• Suggesting future solid business activity.
• A modest cooling of inflation.

However, employment declined for the fourth consecutive month. S&P highlighted growing optimism and early signs of renewed hiring in manufacturing, hinting at a broader economic recovery ahead. Big picture: The US economy has maintained above-average growth for two years despite high inflation and interest rates. With inflation easing and rates beginning to decline, the outlook remains positive. According to Chris Williamson, S&P’s chief business economist, “The prospect of lower interest rates and a pro-business approach from the incoming administration has fueled greater optimism.” ⁵

A burst of confidence among Republicans after Donald Trump’s victory in the presidential election was offset by dashed hopes among Democrats, leaving consumer sentiment barely changed near the end of November. The second of two readings of consumer sentiment in November slipped to 71.8 from 73 earlier in the month, the University of Michigan said Friday. Although sentiment touched a seven-month high this month, it’s still depressed by historical standards. Yet whatever Americans feel about politics, they have continued to spend at levels consistent with a strong and healthy economy. Economists don’t think that will change as the holiday shopping season gets underway. Americans think the economy will improve in the next six months, but the survey shows considerable uncertainty about the potential effects of Trump’s policies. Part of the updated survey was completed after the election. The economy has grown at a stronger-than-expected pace in 2024, and there’s little sign of a slowdown in the works. It’s too soon to tell how much Trump’s policies will affect the economy, but financial markets have reacted positively so far.⁶

1. https://www.census.gov/construction/nrc/pdf/newresconst.pdf
2. https://www.dol.gov/ui/data.pdf
3. https://www.nar.realtor/newsroom/existing-home-sales-grew-3-4-in-october-first-year-over-year-gain-since-july-2021
4. https://www.conference-board.org/topics/us-leading-indicators
5. https://www.pmi.spglobal.com/Public/Home/PressRelease/7c0f490250264deba7b64595935c501a
6. http://www.sca.isr.umich.edu/

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).

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The opinions and information contained in this article are those of Sightline Wealth Management (“Sightline”) as of the date of this article and are subject to change without notice. Sightline endeavours to ensure that the content has been compiled from sources that we believe to be reliable. The information is not meant to be used as the primary basis of investment decisions and should not be constructed as advice. Each investor should obtain independent advice before making any investment decisions.