Weekly Economic Update - Let's Play Catch-Up

Wow! What a couple of weeks. A roller coaster ride on Wall Street, another Fed rate hike, more tepid home sales news, and a partial government shutdown. In spite of it all, most of us managed to celebrate our special traditions surrounding a half dozen religious and secular holidays. We hope you were among them.

Another period of volatility hit the stock markets starting mid-month, with a heart-stopping 653-point (2.9%) plunge in the Dow during the half-day of Christmas Eve trading. The next session saw the largest single-day gain in Dow history, 1,086 points. The crazy continued through the remainder of the year, leaving the Dow down 13% from its October 3rd all-time high of 26,828 and 2,499 points lower than where it started the year.

The Federal Reserve Open Market Committee (FOMC) stayed the course they had set mid-year and raised the Fed Funds Rate a quarter-point. FOMC had been under pressure from some stakeholders to hold rates steady due to the stock market turmoil and several indications that growth may be slowing. Its end-of-meeting statement did indicate it could move cautiously in the future, trimming talk of three increases next year to two. The closely watched “dot plot”, a visual recap of where each Fed member thinks the Fed rate will be at various times, moved lower for the first time in three years.

The Fed, as we’ve noted before, doesn’t have a lot of control over long-term rates, and as if to prove it, the 30-year fixed mortgage rate dropped another 4 basis points (bps). It is down 43 bps since hitting a recent high on November 15th.

Naughty & Nice

One November sales report got in the spirit of the season--the other was a real Grinch. Existing home sales extended their winning streak to a second month, with a 1.9% uptick to an annual rate of 5.32 million units. It was a special gift as analysts had been prepared for a significant decline. Still, two months of small increases have accomplished little in the way of catch-up. The November sales pace was 7.0% below last year’s level.

Pending home sales did quite the opposite. Where expected to post some good numbers for a change, the Pending Home Sales Index instead declined 0.7% compared to October and extended its 10-month string of year-over-year losses to 11.

The existing home sale report delivered an especially large lump of coal to the West; a 6.3% decline from October and 15.4% from November 2017. Pending sales, a leading indicator gave some hope of a change; the region improved by 2.8% from the previous month although it still lags last November by 12.2%.

New home sale data was not reported by the Census Bureau because of the shutdown.

With wishes for a happy, peaceful, and prosperous 2019.

01.04.2019

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