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Economic Data Deluge

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Pre-market activity is finding its equilibrium after a temporary horror show in Monday’s regular session which saw all major indexes plummet, including the Dow falling almost 1000 points, or 3%. The closing bell saw lots of buying off those steep lows, with the Nasdaq almost crossing into the green. Currently, we’re looking at markets hovering around flat.

We won’t be seeing any meaningful economic data before regular Tuesday trading starts, but afterwards we do: Existing Home Sales for August being one of them. In July, a headline number of 5.86 million units sold was the highest in a decade, feeding pent-up demand that hurt the market as the pandemic extended through the summer months. For August, expectations are for 6.03 existing homes to have been sold.

This would continue the narrative that household formation is providing an undercurrent of strength in the overall economy, as pent-up demand continues to find its way into the market. Young adults in rented apartments make their way to starter condos and smaller single-family homes, which pushes those currently in the units toward single-family homes or larger homes in desirable neighborhoods (lately, post-initial Covid spread, this means Americans moving out of crowded cities to the suburbs and exurbs).

Though the current reads are still well off the 2006 peak, when 7.25 million existing homes sold in a month, this is still a healthy sign for the economy. Home improvements, contracting jobs, furniture sales — all of it goes to spur the underlying businesses, including many small businesses, that provide products and services for household formation.

Speaking of spurring underlying businesses, the House Financial Services Committee today will hold a hearing whereby Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell will answer questions regarding needed relief going forward. Without a relief package to follow the CARES Act, which expired more than six weeks ago, will Mnuchin indicate the Trump administration is in favor of small business support, and/or an extension of unemployment benefits? Much is yet unclear on these subjects.

For Powell, the question is closer to: Can the Fed do more? After all, after announcing 0-0.25 interest rates for the next three years, $2.3 trillion in lending to households, and securities purchases now totaling more than $6 trillion, keeping credit markets in business by covering rates to primary dealers, backstopping liquidity in mutual market funds and expanding repo operations, what else is there?