Market Insights

Market Insights

May 24, 2023

Sales of New Single-Family Houses Are Up While Building Permits Are Not

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential sales statistics for April 2023:

• Sales of new single‐family houses in April 2023 were at a seasonally adjusted annual rate of 683,000.
 
• This is 4.1% above the revised March rate of 656,000.
 
• This is 11.8% above the April 2022 estimate of 611,000.
 

• The median sales price of new houses sold in April 2023 was $420,800.
 
• The average sales price was $501,000.
 
• This represents a supply of 7.6 months at the current sales rate.
 

Residential Construction

Today’s release is on the heels of the following new residential construction statistics for April 2023:

Building Permits

• Privately‐owned housing units authorized by building permits in April were at an annual rate of 1,416,000.
 
• This is 1.5% below March and is 21.1% below the April 2022 rate.
 
• Single‐family authorizations in April were at a rate of 855,000. This is 3.1% above the March figure.

Housing Starts

• Privately‐owned housing starts in April were at an annual rate of 1,401,000. This is 2.2% above March but is 22.3% below the April 2022 rate.
 
• Single‐family housing starts in April were at a rate of 846,000. This is 1.6% above March.

Housing Completions

• Privately‐owned housing completions in April were at an annual rate of 1,375,000. This is 10.4% below March, but is 1.0% above the April 2022 rate.
 
• Single‐family housing completions in April were at a rate of 971,000 This is 6.5% below the March rate.

Sources: census.gov

Retail Sales Up 0.4% in April and Up 1.6% Over April 2022

May 17, 2023

Plus Interesting Highlights from 2021 Retail Sales

The U.S. Census Bureau conducts the Advance Monthly Retail Trade and Food Services Survey to provide an early estimate of monthly sales by kind of business for retail and food service firms located in the United States.

Each month, questionnaires are mailed to a probability sample of approximately 4,800 employer firms selected from the larger Monthly Retail Trade Survey.

Retail Sales Up in April 2023

On Tuesday, the U.S. Census Bureau announced the following advance estimates of U.S. retail and food services sales for April 2023 adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $686.1 billion, up 0.4% from the previous month, and up 1.6% above April 2022.

Further:

• Total sales for the February 2023 through April 2023 period were up 3.1% from the same period a year ago.
   
• The February 2023 to March 2023 percent change was revised from down 0.6% to down 0.7%.
   
• Retail trade sales were up 0.4% from March 2023, and up 0.5% above last year.
   
• Nonstore retailers were up 8.0% from last year
   
• Food services and drinking places were up 9.4% from April 2022.

Highlights From Total U.S. Retail Sales in 2021

• Retail sales for the nation increased 17.1%, from $5,572.0 billion in 2020 to $6,522.6 billion in 2021.
   
• Men’s clothing stores had $8.3 billion in sales in 2021, up 59.1% from 2020.
   
• Motor Vehicle and Parts Dealers’ sales increased 22.8%, from $1,208.2 billion in 2020 to $1,484.1 billion in 2021.
   
• Grocery Store sales increased 4.3%, from $759.4 billion in 2020 to $792.3 billion in 2021.
   
• Gasoline Station sales increased 32.6%, from $426.9 billion in 2020 to $566.1 billion in 2021.
   
• Electronic shopping and mail-order houses sales increased 15.4%, from $891.1 billion in 2020 to $1,028.0 billion in 2021.

Sources: census.gov

National Vacancy Rates Higher Versus This Time Last Quarter and Last Year

May 10, 2023

The U.S. Census Bureau announced the following residential vacancies and homeownership statistics for the first quarter 2023:

• National vacancy rates in the first quarter 2023 were 6.4% for rental housing and 0.8% for homeowner housing.
   
• The rental vacancy rate was higher than the rate in the first quarter 2022 (5.8%) and higher than the rate in the fourth quarter 2022 (5.8%).
   
• The homeowner vacancy rate of 0.8% was virtually the same as the rate in the first quarter 2022 (0.8%) and virtually the same as the rate in the fourth quarter 2022 (0.8%).
   
• The homeownership rate of 66.0% was not statistically different from the rate in the first quarter 2022 (65.4%) and not statistically different from the rate in the fourth quarter 2022 (65.9%).
   
• In the first quarter 2023, the median asking rent for vacant for rent units was $1,462.
   
• In the first quarter 2023, the median asking sales price for vacant for sale units was $319,000.

• Approximately 89.6% of the housing units in the United States in the first quarter 2023 were occupied and 10.4% were vacant.
   
• Owner-occupied housing units made up 59.1% of total housing units, while renter-occupied units made up 30.5% of the inventory in the first quarter 2023.
   
• Vacant year-round units comprised 7.9% of total housing units, while 2.5% were vacant for seasonal use.
   
• Approximately 2.1% of the total units were vacant for rent, 0.5% were vacant for sale only and 0.6% were rented or sold but not yet occupied.
   
• Vacant units that were held off market comprised 4.8% of the total housing stock – 1.5% were for occasional use, 0.8% were temporarily occupied by persons with usual residence elsewhere (URE) and 2.5% were vacant for a variety of other reasons.

Sources: census.gov

Number of Job Openings Drops for 3rd Month to Lowest Level in 2 Years

May 3, 2023

The number of job openings decreased to 9.6 million on the last business day of March, according to the U.S. Bureau of Labor Statistics. Over the month, the number of hires and total separations were little changed at 6.1 million and 5.9 million, respectively. Within separations, quits (3.9 million) changed little, while layoffs and discharges (1.8 million) increased. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by establishment size class.

Job Openings

On the last business day of March, the number of job openings decreased to 9.6 million (-384,000) and was 1.6 million lower than in December. The job openings rate was 5.8% in March and was down by 1.0 percentage point since December. In March, job openings decreased in transportation, warehousing, and utilities (-144,000) but increased in educational services (+28,000).

Hires

In March, the number of hires was little changed at 6.1 million, and the rate held at 4.0%. Hires decreased in real estate and rental and leasing (-29,000).

Separations

The number of total separations changed little at 5.9 million in March, and the rate was 3.8% for the fourth month in a row. Over the month, the number of total separations decreased in accommodation and food services (-107,000) but increased in construction (+104,000).

In March, the number and rate of quits changed little at 3.9 million and 2.5%, respectively. The number of quits decreased in accommodation and food services (-178,000). In March, the number and rate of layoffs and discharges increased to 1.8 million (+248,000) and 1.2%, respectively. Layoffs and discharges increased in construction (+112,000), accommodation and food services (+63,000), and health care and social assistance (+42,000).

The number of other separations was little changed in March at 276,000. Other separations decreased in finance and insurance (-31,000) and in real estate and rental and leasing (-7,000).

Sources: bls.gov

EQUITY MARKETS MIXED AGAIN THIS WEEK AS TECH NAMES MAKE A BIG JUMP

April 28, 2023

THE SMALLER-CAPS LAG AND 1Q2023 GDP DISAPPOINTS

• It was another mixed week for equity markets, as the large-cap S&P 500, mega-cap DJIA and tech-laden NASDAQ all finished the final week of April in the green while the smaller-cap Russell 2000 and the developed-international markets (MSCI EAFE) finished in the red
  
  
• The biggest news on the week seemed to be related to earnings, as some of the big tech names generally reported favorable results, including Alphabet (Google), Microsoft, Meta Platforms (Facebook), and Amazon
  
  
• Google and Amazon declined a bit after their earnings report, mostly on future warnings from company executives, while Microsoft and Meta both jumped dramatically
  
  
• There was a decent amount of bank worries this week, as First Republic Bank announced an expected disappointing earnings report that showed their deposits were cut in half
  
  
• In economic news, the Q1 Gross Domestic Product report showed real GDP increasing at an annualized rate of 1.1%, much lower than expected
  
  
• Of the 11 S&P 500 sectors, five were green, led by Communication Services (+3.8%), Information Technology (+2.4%) and Real Estate (+1.5%)
  
  
• Of the six losing sectors, the Utilities (-1.0%) and Industrials (-0.6%) saw the biggest declines 
  
  
• The 2-year Treasury note fell to 4.06% and the 10-year Treasury note yield fell 13 basis points to 3.42%
  
  
• The U.S. Dollar Index closed the week at 101.68, which was relatively flat
  
  
  

Weekly Market Update – April 28, 2023

*Source: Bonds represented by the Bloomberg Barclays US Aggregate Bond TR USD.

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Stock Markets Mixed Again This Week to Close out April 

Stocks were mixed again this week as the large- and mega-caps outperformed small caps and the tech names outperformed the small, large- and mega-cap indices. It was also one of the busiest earnings week of the season, as about 35% of S&P 500 companies representing about 44% of the S&P 500’s market cap reported this week. And late in the week, it was four of the big tech names that drove markets, as Microsoft, Apple, Amazon, and Meta Platforms (Facebook) accounted for about half of the S&P 500’s gain, driven by Meta’s stunning 14% jump on positive earnings news.

But early in the week, the consensus was markedly negative, as there were reports of regional manufacturing activity coming in well below expectations, indications that factories were cutting back on production and then a very negative outlook report on shipping volumes from United Parcel Service, (which shook its stock down 10% on Tuesday alone).

But then on Wednesday, reports of durable goods data surprised on the upside, as March orders rose 3.2%. But that news was tempered because retail inventories rose 0.4% for the month, more than expected and the most since last August.

Then on Thursday, the Commerce Department’s estimate of Gross Domestic Product in the first quarter came in at 1.1%, which was below most predictions of about 2%.

The week also brought renewed worries about the banking sector, as First Republic Bank’s earnings release showed that the bank had suffered more than $100 billion in deposit outflows in the first quarter. The news saw the bank’s stock price get cut in half and trickled into the banking and financial services space throughout the week. Then late Friday, news outlets were reporting that the Federal Deposit Insurance Corporation was planning to take the bank into receivership after markets closed on Friday.

GDP Up 1.1% in 1^st Quarter

On Friday, the Bureau of Economic Analysis reported that real gross domestic product (GDP) increased at an annual rate of 1.1% in the first quarter of 2023. In the fourth quarter, real GDP increased 2.6%.

The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

 “The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributor was motor vehicles and parts. Within services, the increase was led by health care and food services and accommodations. Within exports, an increase in goods (led by consumer goods, except food and automotive) was partly offset by a decrease in services (led by transport). Within federal government spending, the increase was led by nondefense spending. The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees. Within nonresidential fixed investment, increases in structures and intellectual property products were partly offset by a decrease in equipment.

The decrease in private inventory investment was led by wholesale trade (notably, machinery, equipment, and supplies) and manufacturing (led by other transportation equipment as well as petroleum and coal products). Within residential fixed investment, the leading contributor to the decrease was new single-family construction. Within imports, the increase reflected an increase in goods (mainly durable consumer goods and automotive vehicles, engines, and parts).”

Personal Income Increases

• Current-dollar personal income increased $278.9 billion in the first quarter, compared with an increase of $398.8 billion in the fourth quarter. The increase in the first quarter primarily reflected increases in compensation (led by private wages and salaries) and government social benefits.
  
  
• Disposable personal income increased $571.2 billion, or 12.5%, in the first quarter, compared with an increase of $403.0 billion, or 8.9%, in the fourth quarter. The increase in the first quarter reflected an increase in personal income and a decrease in personal current taxes.
  
  
• Real disposable personal income increased 8.0% in the first quarter, compared with an increase of 5.0% in the fourth.
  
  
• Personal saving was $946.2 billion in the first quarter, compared with $758.8 billion in the fourth quarter.
  
  
• The personal saving rate – personal saving as a percentage of disposable personal income – was 4.8% in the first quarter, compared with 4.0% in the fourth.

Lower Net Profit Margins For 7th Straight Quarter

Late in the week, research firm FactSet reported that the (blended) net profit margin for the S&P 500 for Q1 2023 was 11.2%, which is below the previous quarter’s net profit margin, below the year-ago net profit margin, and below the 5-year average net profit margin (11.4%).

Further: “If 11.2% is the actual net profit margin for the quarter, it will mark the seventh straight quarter in which the net profit margin for the index has declined quarter-over-quarter. It will also mark the lowest net profit margin reported by the index since Q4 2020 (10.9%).

• At the sector level, three sectors are reporting a year-over-year increase in their net profit margins in Q1 2023 compared to Q1 2022, led by the Energy (11.8% vs. 10.4%) and Consumer Discretionary (6.0% vs. 4.7%) sectors.
  
  
• On the other hand, eight sectors are reporting a year-over-year decrease in their net profit margins in Q1 2023 compared to Q1 2022, led by the Materials (9.8% vs. 13.8%) sector.

It is interesting to note that analysts believe net profit margins for the S&P 500 will be higher going forward. As of today, the estimated net profit margins for Q2 2023, Q3 2023, and Q4 2023 are 11.6%, 11.9%, and 11.8%, respectively.”

Durable Goods Orders Up 3.2%

On Thursday, the U.S. Census Bureau announced the March advance report on durable goods manufacturers’ shipments, inventories and orders:

New Orders

New orders for manufactured durable goods in March, up following two consecutive monthly decreases, increased $8.6 billion or 3.2% to $276.4 billion. This followed a 1.2% February decrease.

• Excluding transportation, new orders increased 0.3%.
• Excluding defense, new orders increased 3.%.
• Transportation equipment, also up following two consecutive monthly decreases, led the increase, $8.1 billion or 9.1% to $97.4 billion.

Shipments

Shipments of manufactured durable goods in March, up following two consecutive monthly decreases, increased $2.9 billion or 1.1% to $277.0 billion. This followed a 0.8% February decrease.

• Transportation equipment, also up following two consecutive monthly decreases, drove the increase, $3.3 billion or 3.7% to $93.3 billion.
  
  

Consumer Confidence Fell in April and Expectations Index Points to a Recession Within the Next Year

The Conference Board Consumer Confidence Index fell in April to 101.3, down from 104.0 in March.

• The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – increased to 151.1 (1985=100) from 148.9 last month.
  
  
• The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – fell to 68.1 (1985=100) from 74.0.
  
  
• The Expectations Index has now remained below 80 – the level associated with a recession within the next year – every month since February 2022, with the exception of a brief uptick in December 2022. The survey was fielded from April 3 – about three weeks after the bank failures in the United States – to April 19.
  

Present Situation

Consumers’ assessment of current business conditions improved somewhat in April.

• 18.8% of consumers said business conditions were “good,” same as last month.
  
  
• However, 18.1% said business conditions were “bad,” down from 19.3%.

Consumers’ appraisal of the labor market improved slightly.

• 48.4% of consumers said jobs were “plentiful,” up slightly from 47.9%.
  
  
• 11.1% of consumers said jobs were “hard to get,” down slightly from 11.4% last month.

Expectations Six Months Hence

Consumers became more pessimistic about the short-term business conditions outlook in April.

• 13.5% of consumers expect business conditions to improve, down from 16.4%.
  
  
• And, 21.5% expect business conditions to worsen, up from 19.2%.

Sources: factset.com; bea.gov; census.gov; msci.com; fidelity.com; nasdaq.com;  wsj.com;  morningstar.com