Initial jobless claims dipped this week erasing most of the prior week’s increase. Last week’s level was revised up by 1K to 241K and fell down to 225K in the most recent data. That is 10K below forecasts and continues what has been a fairly choppy trend in the indicator. Initial claims are going on roughly two months of switching back and forth between weekly increases and decreases with the most recent print in the middle of the past six-month range. In other words, there has not been much in the way of a consistent or clear pattern in jobless claims.

On a non-seasonally adjusted (NSA) basis, last week saw the usual dip in claims for Thanksgiving week.  For this week of the year, claims have historically only risen 29% of the time. While the direction of the move was consistent with history, the 50.5K decline in the unadjusted number was fairly significant, coming in around 12K more than the historical median for the comparable week of the year.  Due to that larger-than-normal drop, claims remain at impressive levels with only 1968 having seen a lower reading for the comparable week of the year.

Recent readings on continuing claims continue to starkly contrast with those solid readings in initial claims.  Whereas initial claims have returned to levels consistent with the few years prior to the pandemic for some time now, continuing claims have been well below their own pre-pandemic range. That is until this week.  Claims have continued to rise, and as of the week of November 19th (continuing claims are lagged an additional week to the initial claims number), continuing claims rose back above 1.6 million for the first time since the end of February.  That is also back into the low end of the pre-pandemic range.

We would also note that this week’s data marks six months out from the May 21st low of 1.306 million.  With claims having risen over 300K (or 23.12%) since then with a particularly sharp increase in the most recent print, that six-month rate of change appears to be a warning sign for recession.  As shown below, there is plenty of precedent for claims to have risen by as large, if not larger, of a degree in half a year, but every one of those periods has occurred in the midst of a recession. All that is to say that claims continue to sit at healthy levels for the moment but the picture is changing- for the worse. Click here to learn more about Bespoke’s premium stock market research service.

Prospective home buyers have finally gotten some relief at least in terms of mortgage rates. The national average for a 30-year fixed rate mortgage via Bankrate.com’s data is down to 6.78% from a high of 7.35% on November 3rd. While that remains at levels we haven’t seen since the early 2000s, the roughly half of one percentage point decline in the past three weeks is also remarkable.  As shown in the second chart below, on Monday, the national average had fallen 0.53 percentage points in a three-week span.  The only other time in which there was as large of a drop in that period of time was in September 2008.

Given rates for 30-year mortgages are at the highest level in a couple of decades, there has been little incentive for most homeowners to refinance resulting in refinance applications continuing to evaporate. Applications fell 12.87% week over week bringing the index down to the lowest level since June 2000.

Purchases applications have been more largely impacted by the recent reversal in rates.  The Mortgage Bankers Association’s purchase index has now risen four weeks in a row (the longest streak of consecutive increases since last November).  The 12.77% jump in purchase applications in that time has been the largest four-week jump since a 14.61% increase in November of last year.  Of course, that only puts a minor dent in the absolute collapse in mortgage activity over the past year.

Showing purchase applications on a non-seasonally adjusted basis better illustrates housing’s fall from grace this year.  Whereas applications started the year around some of the highest levels of the past decade for that time of year, this week they have hit the lowest level for the comparable week of the year of the past decade. That’s what happens when the FOMC embarks on one of the most aggressive tightening cycles in history!  Of course, the Thanksgiving holiday tends to negatively impact implications, and looking at 2014 (when the Thanksgiving drop occurred a week later than this year) applications were slightly lower than this year.

Shown another way, below we show the percent change in applications from each year’s respective annual peak out through 29 weeks later.  This year has seen applications fall 66%.  That was a similar decline to 2001, and the only year with a larger decline was in 2007.  Click here to learn more about Bespoke’s premium stock market research service.

September numbers for home prices across the country were released by S&P CoreLogic Case Shiller this morning.  Below is a look at how much home prices are up since February 2020 just before COVID hit.  The National index is up 41%, while Tampa, Phoenix, and Miami are all up 63% or more.  At the lower end of the gains are Washington DC, Minneapolis, San Francisco, and Chicago with price increases between 27% and 31%.

Prices are off of their post-COVID highs, however, and remember that this data is only through September.  We’ve likely seen prices fall even further over the last two months.  As shown below, the 10-city and 20-city composite indices are down 3.9%, while the National index is down 2.6%.  San Francisco and Seattle have seen the biggest drops in home prices so far with declines of more than 11%.  San Diego is down 7.9%, Los Angeles is down 6.0%, and Denver is down 5.7%.  Cleveland, Chicago, Atlanta, Miami, New York, and Tampa have thus far seen the smallest drops from their highs with declines ranging from -0.8% to -1.3%.

Below is a table showing the data from the two charts above along with a look at month-over-month and year-over-year percentage change.  So far at least, cities in the western US have seen the biggest declines from their post-COVID highs, while areas in the southeastern US and south Florida that saw some of the biggest post-COVID gains have only seen minimal declines.

Below are long-term charts of the twenty individual city home price indices along with the National and 10-city and 20-city Composite indices.  These charts really show how much home prices rose over the last couple of years and how small the declines have been so far.  The recent drop has been like going from the 100th floor down to the 99th floor of an NYC skyscraper.  Click here to learn more about Bespoke’s premium stock market research service.

With the flare-up of protests in China sparking concerns about production disruptions at Foxconn factories, shares of Apple (AAPL) are once again down 20% from their all-time closing high.  With that move, all four of the mega-cap ‘MAGA’ stocks – Microsoft (MSFT), AAPL, Alphabet aka Google (GOOGL), and Amazon.com (AMZN) – are now down at least 20% from their all-time closing highs.  Along with AAPL’s 22% drawdown, the three others have seen declines in excess of 30% with AMZN down over 50% from its record high.

While all four of the largest stocks in the S&P 500 are down at least 20% from their highs, it’s quite a juxtaposition with the S&P 500 which is down ‘only’ 17.8%.  Before yesterday, the only time since 2010 that all four MAGA stocks were down at least 20% and the S&P 500 was down less than 20% was in a six-week period from mid-May to late June (shaded area in chart).  For years, mega-caps were credited with driving the broader market gains as they handily outperformed their smaller market-cap peers.  In 2022, we have seen the opposite trend play out as mega caps are still seeing larger moves, but to the downside instead of to the upside.  Look on the bright side, think about how much worse the picture would look if smaller stocks in the S&P 500 were still underperforming their mega-cap peers. Click here to learn more about Bespoke’s premium stock market research service.

As we do each Monday, in last night’s Closer we discussed the most recent positioning data from the CFTC’s Commitments of Traders report.  We express this data as the net percentage of open interest of futures only.  In other words, positive readings indicate a net share of open interest is positioned long, while negative readings indicate that shorts are outnumbering longs.

Below is a look at speculator positioning on Treasury futures across the 2-year, 5-year, 10-year, and the long bond.  Positive readings mean speculators are net bullish on the price of the bonds (expecting lower yields), while negative readings mean speculators are bearish (net short) on price (expecting higher yields).  While futures traders are net short all four of the bond futures shown, they’re most bearish on the 2-year, meaning they’re positioned for higher 2-year yields (and lower prices).  As shown in the top left chart, the last two weeks have seen the most extreme short positioning in the 2-year Treasury since April 1992.

From a sentiment perspective, traders appear overly confident that higher 2-year yields are on the way even though we’ve already seen the 2-year yield rise from 0.50% up to 4.45% over the last year.  This seems notable from a contrarian perspective.  Click here to learn more about Bespoke’s premium stock market research service.

Black Friday and Small Business Saturday are now in the rearview and Cyber Monday is underway as the holiday shopping season is off to the races.  There has been a secular shift to online shopping over the past decade meaning Black Friday has a larger online element than the early bird in-store sales of yesteryear. Cyber Monday, meanwhile, may not be the main e-commerce-focused shopping day of the post-Thanksgiving week. Regardless, data from Adobe showed record online sales this year on Black Friday.  While those actual sales figures are perhaps a more concrete and noteworthy data point to gauge the success of the day in generating sales, we would note that Google Search activity for the shopping day has been on the decline in the month of November (when it peaks) for the past few years now. The pandemic in particular has resulted in a sharp downward move in searches for the term. In fact, this year is on pace to have seen the lowest search interest for “Black Friday” since 2007, though with the month not quite over, data is still technically incomplete and can be revised higher.

Similarly, news story mentions of Black Friday and Cyber Monday have generally trended lower over the past few years. In the chart below, we show the number of monthly news story mentions as tracked by Bloomberg in November of the terms throughout the past decade. To make it read similar to the chart above, we have indexed these readings to their peaks at 100.

Cyber Monday mentions peaked all the way back in 2018 and are currently around the low end of readings of the past several years.  Black Friday, meanwhile, peaked last year, but that appears to have been a bit of an outlier as readings have generally been trending lower since 2019.  All of this is not necessarily to say Cyber Monday and Black Friday are less important than in the past, but instead have likely become more ingrained into the holiday season and thus less talked about/researched.

As for how that translates to retail stocks, like consumers, investors appear to get lower prices from retailers during the busiest shopping days of the year! On average, the SPDR S&P Retail ETF (XRT) has declined 0.22% on Black Friday during its history and 1.3% on Cyber Monday.  That compares to an average gain of 5 bps on all days.  Additionally, there has been little consistency in positive price action.  XRT has only risen a little better than a third of the time on Black Friday and just 17.65% of the time on Cyber Monday.  In other words, today’s 0.66% drop in the ETF is by no means unusual. Click here to learn more about Bespoke’s premium stock market research service.