Pre-market futures are bouncing back this morning, ahead of what’s widely expected to be a 25 basis-point (bps) cut on interest rates from the Fed this afternoon. The Dow, trying to break a 9-day losing streak, is up +185 points at this hour. The S&P 500 is +16 and the Nasdaq — the only major index in the green over the past week — is +52 points. The small-cap Russell 2000 is +20 points currently.
Homebuilding Data Mixed for November
Following yesterday’s uneventful headline regarding Homebuilders confidence (it came in flat at 46 points), we see some rather unexpected data on new home construction:
Housing Starts last month came in below expectations: 1.29 million seasonally adjusted, annualized units were light of the 1.34 million expected and the 1.31 million from October. This is the lowest single month on new housing starts since July of this year, which had been the lowest since the pandemic in mid-2020. Single-family starts actually grew by +6.4%, but Multi-family was down -24% month over month.
Building Permits — a proxy for future starts — surprised to the upside: 1.505 million seasonally adjusted, annualized units, above the 1.43 million projected and the slightly revised 1.42 million, which is the best month since February. By way of illustrating the volatility in these numbers, Multi-family rose +22% on the permits side. Single-family units were flat on new permits, year over year.
These figures came about during a month of historically high mortgage rates, above +7%. While demand remains high overall, the housing market in general would benefit greatly from mortgage rates moving lower. This turns back toward today’s Fed decision: a lower Fed funds rate should put some downward pressure on mortgages.
Q3 Account Balance Hits Record Depth
This morning, for the first time ever, the U.S. Current Account Deficit came with a 3-handle: -$310.95 billion. After the previous low in Q1 of 2022, it appeared as if this deficit was being worked off, back to -$220.7 billion in Q3 2023 (still deep, of course; until the 1980s, this metric had always been at or near zero-balance), but has slid to its current position in subsequent quarters.
Deficit spending really fell off a table during the Covid pandemic; while still a 12-figure deficit, these numbers were roughly a third of where they stand today. This grim reality may have some effect on future government spending — including a new proposed tax break — and could possibly benefit from an aggressive Department of Government Efficiency (DOGE) to rein in spending going forward.
What to Expect from FOMC Decision and Powell Presser
The big news will likely not be the decision on interest rates today at 2pm ET, which as we said is nearly certain to arrive at -25 bps to a range of 4.25-4.50%, where we haven’t been in two years. But we will check the changes in tone of the Fed when considering future cuts. The last time the Fed cut 25 bps, back on November 7th, the decision was unanimous. Will it be this time, as well?
At the bottom of that hour, Fed Chair Jerome Powell — coming up on Year 7 of his tenure — will take questions in a press conference about what is concerning the Fed most regarding the economy in 2025. If it’s employment, then expect to see downward sentiment continue. If it’s the specter of inflation creeping back in, the sentiment will more strongly favor a rate hold.
This 25 bps cut would bring us down 100 bps from recent highs. A previous Fed dot-plot had suggested that a year from now we’d be down an additional 100 bps. But we do expect a change of tone from Powell today as he addresses inflation seemingly creating a bottom higher than the Fed would like, with employment steadily eroding from levels of the Great Reopening.
Image: Bigstock
Homebuilding Numbers Come in Mixed
Pre-market futures are bouncing back this morning, ahead of what’s widely expected to be a 25 basis-point (bps) cut on interest rates from the Fed this afternoon. The Dow, trying to break a 9-day losing streak, is up +185 points at this hour. The S&P 500 is +16 and the Nasdaq — the only major index in the green over the past week — is +52 points. The small-cap Russell 2000 is +20 points currently.
Homebuilding Data Mixed for November
Following yesterday’s uneventful headline regarding Homebuilders confidence (it came in flat at 46 points), we see some rather unexpected data on new home construction:
Housing Starts last month came in below expectations: 1.29 million seasonally adjusted, annualized units were light of the 1.34 million expected and the 1.31 million from October. This is the lowest single month on new housing starts since July of this year, which had been the lowest since the pandemic in mid-2020. Single-family starts actually grew by +6.4%, but Multi-family was down -24% month over month.
Building Permits — a proxy for future starts — surprised to the upside: 1.505 million seasonally adjusted, annualized units, above the 1.43 million projected and the slightly revised 1.42 million, which is the best month since February. By way of illustrating the volatility in these numbers, Multi-family rose +22% on the permits side. Single-family units were flat on new permits, year over year.
These figures came about during a month of historically high mortgage rates, above +7%. While demand remains high overall, the housing market in general would benefit greatly from mortgage rates moving lower. This turns back toward today’s Fed decision: a lower Fed funds rate should put some downward pressure on mortgages.
Q3 Account Balance Hits Record Depth
This morning, for the first time ever, the U.S. Current Account Deficit came with a 3-handle: -$310.95 billion. After the previous low in Q1 of 2022, it appeared as if this deficit was being worked off, back to -$220.7 billion in Q3 2023 (still deep, of course; until the 1980s, this metric had always been at or near zero-balance), but has slid to its current position in subsequent quarters.
Deficit spending really fell off a table during the Covid pandemic; while still a 12-figure deficit, these numbers were roughly a third of where they stand today. This grim reality may have some effect on future government spending — including a new proposed tax break — and could possibly benefit from an aggressive Department of Government Efficiency (DOGE) to rein in spending going forward.
What to Expect from FOMC Decision and Powell Presser
The big news will likely not be the decision on interest rates today at 2pm ET, which as we said is nearly certain to arrive at -25 bps to a range of 4.25-4.50%, where we haven’t been in two years. But we will check the changes in tone of the Fed when considering future cuts. The last time the Fed cut 25 bps, back on November 7th, the decision was unanimous. Will it be this time, as well?
At the bottom of that hour, Fed Chair Jerome Powell — coming up on Year 7 of his tenure — will take questions in a press conference about what is concerning the Fed most regarding the economy in 2025. If it’s employment, then expect to see downward sentiment continue. If it’s the specter of inflation creeping back in, the sentiment will more strongly favor a rate hold.
This 25 bps cut would bring us down 100 bps from recent highs. A previous Fed dot-plot had suggested that a year from now we’d be down an additional 100 bps. But we do expect a change of tone from Powell today as he addresses inflation seemingly creating a bottom higher than the Fed would like, with employment steadily eroding from levels of the Great Reopening.