Week of November 4, 2024 in Review
#FedRateCut #Economy #HousingMarket #JobsReport #ButternutSquashSoup
Fed Cuts Rates 25 Basis Points
The Fed’s new easing cycle continued last week, as they cut their benchmark Federal Funds Rate by 25 basis points, bringing it to a new range of 4.5% to 4.75%. This decision was unanimous and followed the 50-basis point cut the Fed made in September (which brought one dissent). ?
Note that when the Fed cuts rates, they are reducing the Fed Funds Rate, which is not mortgage rates or even a long-term rate. The Fed Funds Rate is a very short-term rate, literally a rate that’s only good overnight. Banks use this as the rate that they lend money to one another, but it is the building block for all interest rates.
What’s the bottom line? The Fed’s decision to cut an additional 25 basis points instead of pausing shows their continued confidence that their dual mandate of price stability and maximum employment is in balance.
In his press conference following the meeting, Fed Chair Jerome Powell addressed concerns that the progress to tame inflation has stalled. While the latest Core Personal Consumption Expenditures (PCE) showed annual inflation was at 2.7% as of September, Powell noted that if we annualized the last three and six months of readings, Core PCE would be 2.32% and 2.28% respectively, which is closer to the Fed’s 2% target and in line with what the Fed wants to see.
While Powell did not commit to any specific actions at the Fed’s next meeting on December 18, investors are still expecting another 25-basis point cut at that time, with a pause coming at their meeting on January 29. However, expectations may change, in either direction, as economic data presents itself.
Understanding Seasonal Housing and Appreciation Trends
CoreLogic’s Home Price Index showed that home prices nationwide rose 0.02% in September, and they were also 3.4% higher when compared to September of last year. CoreLogic forecasts that home prices will fall 0.1% in October and rise 2.3% in the year going forward, though their forecasts tend to be conservative.
ICE (formerly known as Black Knight) also reported that national home values rose 0.14% in September after seasonal adjustment, with their index showing that prices are 2.9% higher than a year ago.
What’s the bottom line? Fall usually brings less competition in the housing market because families with school-age children like to be settled ahead of a new school year. While this season is typically the softest for home price growth, these reports show that appreciation remains healthy overall, and homeownership continues to provide wealth creation opportunities.
Continuing Jobless Claims Hit 3-year High
The number of people filing for unemployment benefits for the first time rose by 3,000 in the latest week, as 221,000 Initial Jobless Claims were reported. Continuing Claims rose by 39,000, with 1.892 million people still receiving benefits after filing their initial claim. This marks the highest amount since November 2021 as Continuing Claims have now topped 1.8 million for 22 consecutive weeks.
What’s the bottom line? While Initial Jobless Claims remain subdued, Continuing Claims have been trending higher as employers have clearly slowed down their pace of hiring. Generally, companies tend to stop hiring (which keeps people on benefits for longer) before they start firing (which keeps first-time filers tame), and this also explains some of the dynamics in the data.
This sentiment was also echoed by ZipRecruiter when they reported third quarter earnings, where they noted that “by several measures this is one of the more prolonged downturns in hiring activity.”
Family Hack of the Week
Fall is the perfect season to make this easy and delicious Butternut Squash Soup courtesy of Allrecipes. Serves 4.
In a large pot, melt 2 tablespoons butter over medium heat. Cook 1 small onion (chopped), 1 celery stalk (chopped), 1 medium carrot (chopped), 2 medium potatoes (cubed) and 1 medium butternut squash (peeled, seeded and cubed) until lightly browned, about 5 minutes. Pour in enough chicken stock to cover the vegetables.
Bring to a boil over medium-high heat. Reduce heat to low, cover pot and simmer until all vegetables are tender, about 40 minutes. Transfer soup to a blender and process until smooth. Return to the pot and mix in additional chicken stock to reach desired consistency. Season with salt and pepper to taste.
Enjoy with your favorite crusty bread.
What to Look for This Week
Key inflation reports will make headlines when October’s Consumer and Producer Price Indexes are released on Wednesday and Thursday, respectively. We’ll also see an update on the latest Jobless Claims on Thursday and October Retail Sales on Friday.
Technical Picture
Mortgage Bonds ended last week trading in the middle of a range with the 25-day Moving Average acting as a ceiling and the 200-day Moving Average acting as support. The 10-year broke beneath an important level of support at the 4.332% Fibonacci level. There is plenty of room for yields to continue to improve before reaching the next floor at the 200-day Moving Average.
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