What We Are Watching This Week
- New Home Sales
- Consumer Confidence
- PCE Index and Core PCE
- ISM Manufacturing
Highlights From Last Week
- US Leading Market Indicators
- S&P flash US Services and Manufacturing PMI
- US Existing Home Sales
During a week shortened by the Presidents’ Day holiday in the US and Family Day in Canada, equity indexes generally trended higher, with notable exceptions such as the small-cap Russell 2000 Index, which lost ground. The S&P 500 Index and Nasdaq Composite Index reached new intraday highs, with the Nasdaq experiencing its largest daily gain in about a year on Thursday, attributed to NVIDIA’s significant market capitalization increase of USD 277 billion. This surge followed the chipmaker’s quarterly solid revenue and earnings report, surpassing Wall Street estimates and prompting an increase in its full-year guidance due to robust demand for its chips, particularly in artificial intelligence applications. The TSX finished the short week with a modest gain as energy stocks were the primary drag on market performance.
In Europe, the pan-European STOXX Europe 600 Index reached a record level, rising 1.15% for the week, fueled by NVIDIA’s impressive quarterly results, which ignited a global rally and heightened demand for technology stocks. Among European benchmarks, France’s CAC 40 Index rose by 2.56%, Italy’s FTSE MIB rose by 3.05%, and Germany’s DAX rose by 1.76%. However, the UK’s FTSE 100 Index remained relatively unchanged, reflecting weakness in mining and energy stocks.
On Tuesday, the Conference Board reported that the January Leading Economic Index (LEI) for the U.S. fell by 0.4 percent to 102.7, continuing a decline observed in December 2023. However, this decrease was less severe than in the previous six months. Weekly hours worked in manufacturing and a negative yield spread were primary contributors to this decline. Despite this, six out of ten LEI components showed positive contributions over the past six months, indicating a mixed economic outlook without immediate recession signals. Justyna Zabinska-La Monica of The Conference Board noted this trend, suggesting a slowdown in real GDP growth in the second and third quarters of 2024 but not forecasting a recession. The Conference Board Coincident Economic Index (CEI) increased by 0.2 percent in January, with three out of four components showing positive growth. The Conference Board Lagging Economic Index (LAG) also rose by 0.4 percent, indicating an upward trend in economic indicators. Overall, while economic challenges persist, the data suggests resilience and averted recession signals in January 2024.1
In the week ending February 17, initial jobless claims in the United States dropped to a five-week low of 201,000, indicating ongoing strength in the labor market. The decline of 12,000 claims from the previous week suggests resilience. However, it may have been influenced by a significant decrease in unemployment filings in California due to processing delays related to the President’s Day holiday. Despite this anomaly, new jobless claims have consistently remained between 189,000 and 227,000 early in the year, notably low from a historical standpoint. Economists had anticipated claims to total 216,000 for the week ending February 17. The robust labor market, characterized by low unemployment, is expected to sustain consumer spending and prevent a recession until anticipated interest rate cuts by the Federal Reserve later in the year. Additionally, continuing claims from all programs decreased by 27,000 to 1.86 million, though they have steadily risen since last year, indicating prolonged job searches.2
In February, two S&P surveys revealed Thursday that the U.S. economy exhibited robust expansion, showing no significant signs of impending trouble. The flash U.S. Manufacturing Purchasing Managers Index (PMI) surged to a 17-month high of 51.5, propelled by a notable increase in new orders. Meanwhile, the services PMI slightly dipped to 51.3, remaining above the growth threshold of 50. These surveys, which provide early insights into monthly economic performance, indicate steady, albeit modest, growth with potential for improvement. Despite facing the highest interest rates in over two decades, the U.S. economy continues to perform well. Gross Domestic Product (GDP) is expected to expand by over 2% in the first quarter of the year, following solid gains in the latter half of the previous year. Prospects for future interest rate cuts may provide additional support to the economy moving forward. Key details include a pickup in new orders for manufacturers and stable figures for service firms, with modest growth in hiring. Additionally, businesses reported a slower increase in supply prices, the least since 2020, which could alleviate some cost pressures.3
After a challenging year, existing home sales rebounded in January, growing by 3.1% to reach a seasonally adjusted annual rate of 4 million sales, according to the latest data from the National Association of Realtors (NAR). Although this represents a drop of 1.7% compared to the previous year, it marks a significant improvement over the sharp declines observed throughout much of 2023. Bright MLS Chief Economist Dr. Lisa Sturtevant noted that 2023 saw the lowest level of existing home sales since 1995, leading to expectations of increased market activity in 2024. Sales in the West region showed a notable annual increase of 2.8%, contrasting with declines in other regions. NAR Chief Economist Lawrence Yun highlighted the growth in listings and the favorable mortgage rates driving buyer activity. Unsold inventory saw a modest increase, translating to three months of supply, slightly up from the previous year’s 2.9 months. Median home sale prices rose, reaching $379,100, marking the seventh consecutive month of annual increases nationwide. Yun noted the prevalence of multiple offers and a high share of cash deals, indicating robust market activity and record-high housing wealth. Sturtevant pointed out that the increase in closed sales in January was driven by declining rates in December, which attracted more buyers. Despite strong demand, particularly from the sizable millennial population entering the prime first-time home-buying range, many need help accessing the market due to escalating home prices and elevated mortgage rates.4
| WK | Year to Date | |
| Dow | 1.30% | 3.83% |
| S&P500 | 1.66% | 6.69% |
| Nasdaq | 1.40% | 6.56% |
| S&P400 Mid-cap | 1.05% | 2.75% |
| Russell | -0.79% | -0.51% |
| TSX | 0.80% | 2.30% |
| Oil | -2.40% | 6.80% |
- https://www.conference-board.org/topics/us-leading-indicators
- https://www.dol.gov/ui/data.pdf
- https://www.pmi.spglobal.com/Public/Home/PressRelease/36cedd38091e42eda51ffea4468c4c03
- https://www.realestatenews.com/2024/02/22/existing-home-sales-up-after-a-year-marked-by-declines
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). Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors.
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