Housing market data is the main focus in today’s macroeconomic slate, and although Housing Starts and Building Permits both came in below estimates, weekly mortgage applications from the Mortgage Bankers Association (MBA) were much stronger.  MBA’s seasonally adjusted purchase index rose another 3.46% week over week. That marked the ninth consecutive sequential increase (the longest such streak on record) and the highest level for the index of the post housing crisis period.  In fact, this morning’s reading was the highest since the first week of 2009.

That is a massive rebound after purchase apps had fallen to their lowest levels since early October of 2015 back on April 10th.  In the ten weeks since that low, purchases have rise 76.62%.  As shown in the second chart below, that is the largest 10-week increase since the early days of the index: March of 1991.

As for what has driven that surge in purchase applications, interest rates have played a major role.  Although they are off the lows after rising a few basis points over the past few days, last Thursday the national average for a 30 year fixed rate mortgage fell to 3.38% which was the lowest level since October 3rd of 2016.

Low mortgage rates have also led to strong levels of refinancing applications.  Earlier this year refinances spiked to their highest level since 2009.  In the wake of that March peak, refinance application strength subsided a bit, but has remained at very strong levels.  This week’s 10% WoW increase marked the first back to back weeks with higher refinance applications since the last week of February and the first week of March.  That also comes after seven consecutive weeks of declines from mid-April through the end of May. Even though refinances are nearly 65% off that early March peak, they remain at some of the highest levels since 2013.

In addition to low rates, due to the COVID-19 shutdowns occurring during what is a seasonally strong time of year, seasonal catch up is also providing a boost this year.  As shown below, the past few weeks have seen some of the strongest readings for the specific week of the year of the past decade.  That comes shortly after shutdowns resulted in the weakest readings of the past decade for the weeks around March and early April.  Additionally, purchases have continued to rise despite the annual peak typically having already occurred by this point in the year.  In the past decade, the annual peak for purchases is usually put in place by mid-April or mid-May. The only year with an annual peak later than that was 2015 on account of a change in mortgage disclosure rules leading to a one time surge in purchase applications. While 2020 is far from over, the continued strong readings are sure to make a later seasonal peak than normal.

Despite the recent strength, the damage from weakness earlier in the year still hasn’ been undone. Looking at the YTD sum of purchase applications through the current week of the year (24th week) applications are down roughly 2% in 2020 vs 2019.  Given that the US is in the midst of a global pandemic, however, it could be a whole lot worse. Click here to view Bespoke’s premium membership options for our best research available.

Over the past few months, we’ve seen record drops and now record bounces for many of the most widely followed economic indicators.  The Citi Economic Surprise indices, which track how economic data is coming in relative to forecasts, have been a prime example of the moves in economic data.  Back at the end of April, the index for the US had fallen to a record low of -144.6, but that has since turned around.  Even before the addition of today’s blockbuster US retail sales report, the Citi Economic Surprise index had reached a new all-time high yesterday.  With a further boost from today’s releases, the all-time high is now even higher.  That means that economic data in the United States has been coming in far stronger than economists have had penciled in.

While the US has seen big beats for the country’s economic data, the same cannot be said for the broader world.  The global index (which would include the US) is at a much more modest level in just the 42nd percentile of all readings.  Although it was briefly positive one week ago, the global index is not even positive. Negative readings indicate that more indicators from around the globe are still releasing at levels worse than forecast. Granted, that is still improved from April and May when the index was at some of its lowest levels since the Financial Crisis.

The same can also be said for the G10 countries. Even though the US has likely provided a boost, the index for G10 countries remains negative and more or less in the middle of its historic range. Unlike the global index, though, the index for the G10 has not been in positive territory since April 1st.

Taking another look at the developed world, more specifically the Eurozone, there has not been much of a rebound at all.  The Citi Eurozone surprise index is currently around -200 compared to a low of -304.6 on May 11th. Despite the nearly 100-point increase over the past month, it is still in the bottom 1% of all readings since 2003.

Switching over to Emerging Markets, there was never an outright collapse in the surprise index as was seen in other areas of the world. In fact, the index had been sitting in negative territory for much of the past couple of years, but the past several weeks have actually seen fairly consistent positive readings.  But the emerging markets index has been falling back towards negative territory so far in June. Click here to view Bespoke’s premium membership options for our best research available.

Back in April, like many economic indicators, the NAHB’s reading on the single-family housing market came crashing down.  The index bottomed out at 30 which was its lowest level since June of 2012 when the headline number had been 29. May’s reading saw a bit of a bounce as the index rose to 37, but even at those levels, it was still showing similar readings to the late summer of 2012. June, on the other hand, showed a massive improvement for both the overall market index and each of the components and other sub-indices. Now, while still well off the highs from only a few months ago, each index is greatly improved and sitting at the bottom of the past several years’ range.

This month’s release also blew estimates out of the water.  The headline number had been forecasted to come in at 45 which would have still been a contractionary reading.  Instead, the actual number came in 13 points higher at 58.  Only two months after the worst miss relative to expectations, today’s 13 point beat was the biggest beat versus expectations since at least 2003.

The headline number, as well as just about every sub-index, also observed their largest one-month increases on record. While those increases did not leave any sub-index at a new high, they are now back into the middle of their historical ranges. Additionally, all but two sub-indices (Traffic and the Northeast) are also now showing readings above 50 meaning homebuilders have a more favorable outlook on the market.  Just last month every sub-index showed unfavorable conditions.

In the charts below, we show the blowout of the month over month changes over the past few releases for the headline index as well as its three components.  As previously mentioned, each one experienced its sharpest one month increase on record.

Meanwhile, the same can be said for the indices covering each of the US regions.  The only region to not experience a record month over month increase was the West, but even that was its second-largest MoM gain ever. As with the individual categories, most readings are showing more favorable housing markets although the Northeast, like the index for Traffic, remains below 50 (unfavorable market) despite its record uptick. Click here to view Bespoke’s premium membership options for our best research available.

We’re basically right in the middle of the earnings off-season right now when only a handful of companies are reporting quarterly earnings each day.  Bespoke maintains a huge historical database of quarterly earnings reports for nearly every stock traded on US exchanges.  Clients have access to the database — called the Earnings Explorer — right on our website.  The Earnings Explorer contains a full calendar of upcoming earnings reports, summary charts highlighting historical trends on earnings and revenue beat rates, guidance numbers, and historical quarterly results for individual stocks going back 20 years.

As shown below, the number of earnings reports by day over the next three weeks is minimal, and then the Q2 reporting period starts up in full force in mid-July.  Click here to view Bespoke’s premium membership options for our best research available.

Below is a chart from our Earnings Explorer that shows the historical “beat rate” for all stocks that have reported earnings over the last five years.  This reading shows the rolling 3-month percentage of companies that have reported stronger than expected EPS and sales numbers.  Notably, the bottom-line EPS beat rate had been well above its historical average since late 2017, but it has just recently dipped below its average with a steep decline over the last three months.  Conversely, the percentage of companies beating sales estimates has held steady over the last few months and is now higher than it was for all of 2019.  Over the last three months, 61.5% of companies have beaten top-line sales estimates, which is five points above the long-term average of 56.5%.

We also monitor the “guidance spread,” which is the difference between the percentage of companies raising guidance and lowering guidance on a rolling three-month basis.  As shown, after plummeting from only slightly negative levels as we entered 2020 to -17% at the end of May, the guidance spread has begun to increase quickly in June.  Since the reading is still in the red, it means that companies are becoming “less negative” about the future.

One final indicator that we track is the median one-day percentage change of stocks that report earnings.  Over the last three months, stocks that have reported earnings have seen a median one-day share price reaction of +0.20%.  As shown below, that’s a huge increase from extremely negative price reactions to earnings that we saw in March and April.

Below we have taken snapshots of two pages from our Earnings Explorer tool that provides snippets of information you can easily review for the stocks you’re most interested in.  To try out our Earnings Explorer free of charge, start a two-week free trial to Bespoke Institutional today!