The week of December 30 included only a few national economic reports that could have influenced markets. Next week’s December unemployment and payrolls report may end up being overlooked as noise after the huge rally we have seen in stocks and the rise in bond yields, and we are still about 30 days out before getting our first look at fourth-quarter gross domestic product (GDP).
24/7 Wall St. wanted to offer a quick hit look at five U.S. economic data points combined. Four are actual economic issues, and one is simply a point of content for those who like human-led trading floors rather than just machines.
We Are Confident. Consumer confidence showed no signs of abating in December, although the report was directionally mixed. The index is now up 12.9 points since the November election, and the December level is 113.7, the highest reading dating back to August 2001 (but guess what happened on the 11th day of that following month). The gains were centered in expectations but the employment on jobs-tough-to-get will likely not heat up expectations for the December employment report due next week.
Inventory-Driven GDP? Wholesale inventories rose by 0.9% in November, after an upwardly revised 0.1% drop in October. Retail inventories also rose by 1.0% in November, versus a 0.4% drop in October. The build-up on the wholesale inventories side was equal among durables and nondurables, and the retail build-up was tied mostly to vehicles. While the builds were a surprise, they are likely a positive for the fourth-quarter GDP report, even if it could represent an unwanted level of inventories.
Peekaboo on Jobs. Good news remains on the front for employment and jobless claims. In the week ending December 23, the layoffs remain near historically low levels. The Department of Labor reported that its weekly jobless claims fell by 10,000 to a seasonally adjusted 265,000. This was more or less in line with expectations, but it sets up a solid base for December’s payrolls and unemployment report. Initial jobless claims have now been under the 300,000 threshold for 95 consecutive weeks, the longest streak since 1970.
Mixed Housing. The S&P CoreLogic Case-Shiller national report showed a gain of 5.6% in the 12-month period in October. This was up from the 5.4% increase reported in September, but it is known that this is a lagging indicator of the housing market. On a more forward-looking basis, the National Association of Realtors represented this week that pending home sales (contracts that are signed for the purchase of existing homes) actually fell 2.5% from October to a seasonally adjusted 107.3 reading. The reason this report matters is that actual sales typically close within a month or two of signing, after the mortgage process closes.
Non-Economic Trauma for Old-School Traders. This may not matter to millennials who think that online-only for everything is all that matters, but for those who grew up loving financial markets there is a sad change. Friday is the day that the CME closed the NYMEX trading pits open outcry trading floor. This is just the most recent step (likely of many more in the years ahead) in the endless moves to electronic trading.
That’s all. Be sure to look at our expectations for 2017 and beyond!