Aug 15, 2023
As the national average for a 30-year fixed rate mortgage eclipsed 7.5%recently, homebuilder sentiment has turned lower. The Housing Market Index from the NAHB fell to 50 in August from 56 the previous month. That six point drop month over month ranks as the eleventh largest decline in the survey’s nearly 40-year history.
Homebuilders reported significantly weaker sentiment across the board with mid-single digit declines for present and futures sales as well as traffic. Geographically likewise also saw broad declines. The West experienced the biggest drop and now has the lowest reading with respect to its historical range. Meanwhile, the Northeast index has managed to hold at a more historically healthy level, albeit it too fell significantly in August.
Homebuilder stocks are trading higher today, but they have come well off the early highs since the release of the sentiment numbers. As things stand for the group, the past month has seen the homebuilders consolidating as they continue to trade handily above their respective 50-DMAs.
Aug 15, 2023
The New York Fed published the first of regional manufacturing surveys this morning, and results were disappointing. Whereas last month saw a slightly expansionary reading of 1.1 in the headline index, the August reading fell firmly back into contraction at a level of -19 far exceeding forecasts of -1.
In the table below, we show each category of the report. As shown, the drop in the headline number was almost entirely driven by significant deterioration in new orders, shipments, and employment metrics. Breadth otherwise was actually fairly positive. As for six month expectations, readings across the board have been much healthier. In addition to significant increases month over month (many of which rank in the top decile of historical monthly changes), these readings are not as historically weak as their corresponding levels for the current condition indices.
As previously mentioned, the big drop in the headline index was largely driven by weakness in new orders and shipments. Each of those (as with the headline index) fell by more than 20 points month over month which ranks in the 3rd percentile of all monthly moves. That shift from slightly expansionary to historically contractionary readings is another bout of volatility in these readings consistent with big swings in previous months. Amidst that volatility, these readings have generally pointed to the side of demand having weakened, but expectations have begun to move in the opposite direction. As shown below, expectations indices for new orders, shipments, and unfilled orders have all reached the highest level since March 2022.
Both prices paid and received rebounded in August with those month over month increases coming in the 87th and 91st percentiles, respectively, of all monthly changes. In spite of those increases, that overall picture of prices trending lower remain in place.
As mentioned earlier, aside from new orders and shipments, employment metrics were the other point of weakness for current condition indices. However, number of employees is the most elevated category of all expectations indices after a 96th percentile month over month increase in August. Meanwhile, both capital expenditures and technology spending likewise experienced large month over month jumps in August. All combined, that would indicate a dramatic turnaround in manufacturing firms spending plans.
Aug 14, 2023
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a look at some reasons why not to read too far into today’s price action (page 1) followed by a dive into real yields and bill issuance (pages 2 and 3). We then recap the latest survey from the NY Fed on consumer inflation and financial situation expectations (pages 4 and 5). We close out with a review of the latest positioning data (pages 6-8).
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Aug 14, 2023
Alongside other risk assets, metal commodities have likewise had a rough go of it in August. As we noted in Friday’s Bespoke Report, the single worst performing asset month to date has been silver. As shown below, front month silver futures have quickly pulled back to the bottom of the uptrend channel that has been in place for the last year or so.
As for gold, this spring saw another unsuccessful retest of the 2020 highs, with a “triple top” now formed.
Turning to the industrial metal copper, once again, performance this month has been lackluster. This month’s drop in copper is putting to the test the uptrend off of the COVID Crash lows.
With weakness in both copper and precious metals, the relative strength line of copper versus gold has been fairly stable. As indicated by a falling and negative line in the chart below, copper has underperformed gold over the past five years, albeit more recently the line has not made any major shifts in trend.
