Week in Review: November 24, 2023

November 27, 2023

Recap & Commentary

Markets ended the week higher with the S&P 500 notching its 4th consecutive weekly gain. With earnings season largely complete and a relatively light economic news calendar, markets seemed to generally take the path of least resistance which for the month of November has been up.

Minutes from the Fed’s most recent meeting had no discernable impact on the markets as they largely reiterated the Fed’s current narrative. The minutes indicated that economic activity has been resilient; there remains a high degree of uncertainty regarding the economic outlook; and that the Fed continues to feel it is appropriate for policy to remain restrictive for some time until inflation is clearly moving down sustainably toward the central bank’s 2% target.

Thanksgiving weekend provided an early litmus test regarding consumers’ continued appetite to spend.  Consumer spending has generally surprised to the upside in 2023, helping the economy defy earlier expectations that it would be in recession by now. However, still-elevated inflation, reduced savings, higher credit card debt and rates, and lousy sentiment, threaten to curtail future spending.  Despite those headwinds, early indications suggest that consumers remain inclined to spend. According to Adobe Analytics, online sales on Thanksgiving and Black Friday rose 5.5% and 7.5%, respectively, from 2022, to records of $5.6B and $9.8B. Still to be seen is how the remaining shopping season unfolds and whether the steep discounts offered in the leadup to, and through, Thanksgiving weekend simply pulled demand forward.

Economic Commentary

Existing home sales declined 4.1% in October to a 3.79M annual rate, below forecasts for 3.9M. That marked the slowest pace of sales since 2010.  Compared to a year ago, sales were down 15%. Based on the pace of sales, supply in October, measured in months, stood at 3.6. In a normal supply/demand environment, supply typically stands around five (5) months. The current tight inventory has helped keep a floor under home prices despite surging mortgage rates. The median price of an existing home was $391,800 last month, an increase of 3.4% since October 2022.

Durable goods orders declined 5.4% in October, worse than the expected 3.2% decline. Excluding the volatile transportation category, which declined 15%, new orders were unchanged since last month. Durable goods orders rose 4.0% from a year ago.

The US Purchasing Managers Index (PMI) composite was unchanged in November at 50.7, indicative of slight growth during the month. Manufacturing PMI fell to a 3-month low of 49.4 vs. expectations for 49.7. Services PMI increased to a 4-month high of 50.8 vs. expectations for 50.4. Employment dipped slightly into contraction territory for the first time since June 2020 as both the services and manufacturing sectors trimmed headcount due to modest demand and lower backlogs of work.  Input prices rose during the month but at the slowest pace since October 2020 as lower energy and raw material costs provided some relief for businesses.

Of Note

Israel and Hamas agreed to a four-day truce during which hostages held by Hamas and prisoners held by Israel will be exchanged. In addition, the truce allows for the delivery of food, fuel, and other supplies into Gaza.

Market Indices   (As of 11/24/2023)

• Core PCE Inflation
• Consumer Confidence
• ISM Manufacturing
• New Home Sales
• Pending Home Sales
• Personal Spending & Income
• Weekly Jobless Claims