Weekly Market Update: S&P Final US Manufacturing, ADP Employment Report, US Employment Report

What We Are Watching This Week

  • S&P Final US Manufacturing and ISM Manufacturing
  • ADP Employment Report
  • US Employment Report
  • ISM Services

Highlights From Last Week

  • S&P Case-Shiller Home Price Index (20 cities)
  • Consumer Confidence
  • Pending Home Sales
  • Chicago PMI

During the holiday-shortened week, the major stock benchmarks displayed mixed performance. The S&P 500 Index extended its winning streak, marking the ninth consecutive weekly gain, the longest since 2004. It also came close to its all-time intraday high, with just a 0.53% difference. The year closed on a solid note for all major indexes, with the Nasdaq Composite leading the way, achieving its sixth-largest annual gain since its inception in 1971. The TSX finished the year in positive territory despite oil falling 11%. As anticipated, trading activity and market movements were subdued throughout the week, especially with the closure of trading on Monday and many investors being away.

In Europe, the pan-European STOXX Europe 600 Index reached nearly two-year highs, rising by 0.41%. This gain was attributed to growing optimism about interest rate cuts in the early part of the following year. However, major European stock indexes had mixed performances, with Germany’s DAX increasing by 0.22%, while Italy’s FTSE MIB and France’s CAC 40 remained relatively stable. The UK’s FTSE 100 saw a rise of 0.6%.

The economic calendar for the week was relatively light, and its overall sentiment could be considered negative.

Home prices in major U.S. metropolitan areas have reached a new record high, marking the ninth consecutive month of increases. This price surge is primarily attributed to a persistent shortage of available homes for sale. In October, the S&P CoreLogic Case-Shiller 20-city house-price index rose by 0.6% when seasonally adjusted, with a 4.9% increase in the 12 months leading up to October. The national index, which provides a broader measure of home prices, also rose by 0.6% in October, with a 4.8% year-over-year increase. Both the 20-city and national indexes have reached all-time highs. Notably, Detroit experienced the most significant year-over-year home price gains in October, with an 8.1% increase, followed by San Diego and New York. Portland, Oregon, was the only city where prices fell that month. The continuous rise in home prices has persisted despite mortgage rates hitting 8% in October, as demand remains strong due to limited housing supply. Homeowners are reluctant to sell their properties, given the historically low mortgage rates of 3% or 4%, further exacerbating the shortage of available homes. Once there is a shift in demand or a substantial increase in housing supply, the market’s current state will likely stay the same. The trend is expected to continue as mortgage rates ease and the Federal Reserve adopts a more accommodative stance. It is anticipated that demand for homes in early 2024 will remain strong, putting further upward pressure on prices, with most markets reaching new price highs throughout the year.1

In a separate survey by the Federal Housing Finance Agency (FHFA), U.S. house prices increased by 0.3 percent in October compared to September. Over the year leading up to October 2023, house prices significantly rose 6.3 percent. The September price increase of 0.6 percent was revised to 0.7 percent. When looking at different census divisions, monthly price changes in October ranged from -0.3 percent in the New England division to +1.1 percent in the Middle Atlantic division. Over the same 12-month period, changes varied from +2.6 percent in the Mountain division to +9.9 percent in the Middle Atlantic division. Dr. Nataliya Polkovnichenko, a Supervisory Economist at FHFA, noted that house price gains remained strong over the past year, although monthly appreciation moderated in October, with some divisions experiencing slowdowns compared to the previous month. The FHFA House Price Index provides a comprehensive view of house price changes based on data from all 50 states and over 400 American cities, using a transparent methodology that analyzes house price transaction data.2

On Thursday, the U.S. Labor Department reported that in the week ending December 23, initial jobless claims increased by 12,000 to 218,000. This figure exceeded economists’ expectations, as they had estimated that new claims would rise to 215,000. The previous week’s claims were revised, showing a 3,000-claim increase to 206,000, slightly higher than the initial estimate of a 2,000-claim rise to 205,000. Additionally, the number of individuals already receiving jobless benefits from all programs increased by 14,000 to 1.875 million for the week ending December 16. Economists anticipate that job growth may slow in the coming year. The December jobs data is set to be released next week. It’s worth noting that during the holiday shopping season, which spans from Thanksgiving to late January and involves temporary hiring, jobless claims tend to fluctuate, making it necessary to interpret these figures cautiously when assessing labor market trends.3

In November, pending home sales in the United States remained unchanged compared to the previous month, as the National Association of Realtors (NAR) reported. According to a Wall Street Journal survey, the Pending Home Sales Index retained its value of 71.6 in November, defying economists’ expectations of a 1% rise. However, pending home sales declined by 5.2% on a year-on-year basis. Breaking it down by region, sales increased in the Northeast, Midwest, and West in November but experienced a drop in the South. Pending home sales have followed a downward trend throughout the year. Despite this, there is optimism in the housing market due to declining mortgage rates over the past two months. Economists anticipate a modest rebound in home sales shortly. Pending home sales are considered a leading indicator for existing home sales, typically preceding them by a month or two.4

On Friday, the December Chicago Business Barometer, also known as the Chicago PMI, dropped by 8.9 index points to a reading of 46.9. This figure was significantly lower than the expected 50 reading in a survey of economists by the Wall Street Journal. In November, the index surged to 55.8, marking its highest level in 17 months following the end of the United Auto Workers strike. A reading below 50 in the Chicago PMI indicates a contraction in economic activity. Before the November surge, the index had been in contraction territory since August 2022. The Chicago PMI is produced by the ISM-Chicago with MNI and is typically released to subscribers three minutes before its public release at 9:45 am Eastern time. It is the last regional manufacturing index to be published before December’s highly anticipated national ISM manufacturing data, scheduled for release the following Wednesday. The regional Federal Reserve manufacturing surveys for December have shown signs of a modest weakening in the manufacturing outlook.5

 WKYear to Date
Dow0.82%13.70%
S&P5000.32%24.23%
Nasdaq0.12%43.42%
S&P400 Mid-cap-0.21%14.45%
Russell-0.34%15.09%
TSX0.30%8.10%
Oil-3.00%-11.10%
  1. https://www.spglobal.com/spdji/en/index-announcements/article/sp-corelogic-case-shiller-index-accelerates-in-october/
  2. https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-HPI-Monthly_12262023.pdf
  3. https://www.dol.gov/ui/data.pdf
  4. https://www.nar.realtor/newsroom/pending-home-sales-recorded-no-change-in-november
  5. https://www.fxempire.com/macro/united-states/chicago-pmi

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.

Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of Ninepoint Partners LP, it is an investment fund manager and advisor and exempt market dealer. By virtue of the same parent company, Sightline is affiliated with Ninepoint Partners LP. Information and/or materials contained herein is for information purposes only and does not constitute an offer to sell or solicitation to purchase securities of any issuer or any portfolio managed by Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed funds.

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 endeavors 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.

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