Baker Market Update – wk220121

Happy Friday everyone! I hope everyone is safe, healthy and warm on this cold January day. With the Monday Holiday to celebrate Dr. Martin Luther King Jr., this week’s economic release calendar was rather light.

On Wednesday, housing starts data for December was released. Privately built housing starts were at an annual rate of 1.7 million, an increase of 1.4% from November. The housing market continues to be red hot and new home building continues to be a big part of that. Builders ramped up the pace of construction in 2021 to attempt to meet the housing demand. Cost of new homes show no signs of decreasing with rising lumber prices and worker wages adding to the overall cost.

On Thursday, December’s existing home sales data showed a 4.6% drop as supply of homes hit a record low. There were just 910,000 homes for sales at the end of December, a drop of 14.2% from a year prior. Sales would have likely been stronger if it were not for an incredible low supply of homes. Low inventory continues to put pressure on home prices as the median price of an existing home sold in December was $358,000, an increase of 15.8% from a year prior.

Thursday also brought about the weekly initial jobless claims that has been closely tracked by many since the start of the pandemic in early 2020. Initial jobless claims totaled 286,000 for the week ended January 15th, well above the 225,000 estimates. This week’s jobless claims number was the higher since mid-October 2021. Has the wintertime omicron surge affected the employment picture? It is possible, but we will stay tuned to the next several weeks of jobless claim data to see if there is a trend.

Next week’s economic release calendar bring a significant number of releases as well as a statement from the Federal Open Market Committee as they will conclude their first meeting of 2022 on Wednesday. Will the Fed raise interest rates during the current COVID surge we are experiencing? Tune in next week! Other key releases next week include the first or advance release of Gross Domestic Product for the 4th quarter of 2021 (estimates are for a 5.3% increase), income and spending data, and personal consumption expenditure inflation data.

Both equity and treasury markets had their fair share of volatility this week. The 10-year Treasury Yield hit a recent high of 1.86% earlier this week and has rallied some since them and is currently sitting at a 1.74% yield. The 2-year Treasury Yield snuck above 1% earlier this week and currently sits just below 1%. The Dow Jones Industrial Average is off about a half of percent this morning and is down about 1,000 points on the week. Some technology stocks like Netflix have recently reporting earnings. Netflix had a disappointing quarterly report and is the latest setback for technology investors. Are people not enjoying Cobra Kai Season 4? Are they eagerly waiting for the new season of Ozark to be released? Stay tuned!

In the wise words of Lester… be careful out there!

2-Year Treasury Yield – January 2020 to Present

Source: Bloomberg, L.P.

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