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Mild Markets Close in Green; More Soft Housing Data

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Market participants delivered another tepid trading day, with all four major indices closing slightly in the green. Gains trimmed throughout the course of the session; they started out positive on better-than-expected Jobless Claims and the latest Philly Fed survey this morning, then closed +0.06% on the Down, +0.21% on the Nasdaq, +0.23% on the S&P 500 and +0.67% on the small-cap Russell 2000.

We were up and down on summer trading volumes today, with vacillating opinions about whether the Fed will really relax interest rate hikes when it resumes monetary meetings roughly one month from now. Clearly, it’s too early to know for sure, but all things being equal, keeping its 75 basis-point increases intact looks like the odds-on move as of today.

There will be some economic prints out next week (none tomorrow, unless we count an advance report on Selective Services for Q2), most notably Personal Consumption Expenditures (PCE) for July, due out a week from tomorrow. The price index showed +6.8% year over year a month ago, +4.8% on core. But because PCE figures borrow content from other already reported data, the capacity for a major surprise — either higher or lower — is diminished.

Earlier today, Existing Home Sales for July hit the tape, coming in dead-even with expectations to 4.81 million seasonally adjusted, annualized pre-owned homes sold. This was down nearly -6% month over month, -20% year over year — also the slowest rate of existing home sales since November of 2015 (not including the early months of the pandemic). July recorded 1.31 million existing homes for sale, exactly the same as a year ago.

Meanwhile, mortgage rates across the U.S. have leapt on higher Fed funds rates. Back when the Fed was keeping rates at 0.00-0.25%, home buyers were finding mortgage rates around 3% — they are more than double that today. And while the median home price has ramped up +10.8% year over year (to $403,800), both the low end of the market and the high end are seeing large declines: -31% year over year for homes between $100-250K, -13% for those over $1 million.

Markets are still up nicely over the past month — five of six up-weeks on the Dow so far — but have plateaued over the last week of trading or so. We don’t see any great pivot emerging here; really, this market condition is likely because of two rather uncomplicated things: 1) restraint from running up too high on vaguely good news, as he markets did through last fall, and 2) lighter trading as August passes the midway point, but still two and a half weeks away from Labor Day, after which trading activity picks up again.

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