Tuesday, December 22, 2020

Mixed markets after Congress approves virus relief package

Dow dropped 96, advancers over decliners about 5-4 & NAZ gained 43.  The MLP index added 1 to the 143s & the REIT index was flattish in the 365s.  Junk bond funds crawled higher & Treasuries were in demand.  Oil fell to the low 47s & gold was off 15 to 1867.

AMJ (Alerian MLP index tracking fund)








CL=FCrude Oil47.33
-0.64-1.3%




























GC=FGold 1,877.00
-5.80 -0.%


































 




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Congress passed a mammoth coronavirus relief & gov spending package last night as it moves to inject long-delayed aid into the fight against a once-in-a-century health & economic crisis.  Both chambers easily approved the more than $2T legislation in votes that dragged late into the night.  Congressional leaders attached $900B in pandemic aid to a $1.4 T measure to fund the gov thru Sep 30.  The House approved the package in a 359-53 vote. & the Senate then passed it by a 92-6 margin.  At the same time, Congress passed a 7-day stopgap spending bill to keep the gov open during the time it takes for the full-year legislation to get to Pres Trump's desk.  Trump signed the temporary spending bill, keeping the gov funded thru Dec 28.  The bill would send needed help to Americans for the first time since the spring — though it will come too late for families that have struggled to eat & stay in their homes, or small businesses that have already had to close their doors for good.  The package includes a boost to jobless benefits, more small business loans, another $600 direct payment & funds to streamline critical distribution of Covid-19 vaccines, among a bevy of other provisions.  Trump is expected to sign it into law in the coming days, weeks before he will leave office.

Congress passes long-awaited Covid relief bill and government funding plan

The US economy's record growth during the 3rd qtr was even faster than previously believed, according to a 3rd estimate released by the Commerce Dept.  GDP increased at an annualized 33.4% rate during Q3, a bump of 0.3 percentage points from the 2nd estimate & ahead of the 33.1% estimate.  The upward revision was mostly supported by larger increases in personal consumption expenditures & nonresidential fixed investment.  Imports, which are subtracted from GDP, were higher than previously reported.  The expansion comes as the US economy, the world's largest, battles back from the COVID-19-induced slowdown – the sharpest of the post-World War II era.  The economy contracted at a 32.9% annual pace during Q2 as govs ordered the closure of non-essential businesses to help slow the spread of the virus.  

US economy grows at record 33.4% pace in rally from coronavirus lows

After 5 consecutive months of gains, closed sales of existing homes turned lower in Nov.  They fell 2.5% on a month-to-month basis to a seasonally adjusted annualized rate of 6.69M units, according to the National Association of Realtors.  But sales were a strong 25.8% higher from a year earlier.   While demand for homes is still high, fueled in part by the stay-at-home culture of the coronavirus pandemic, supply is incredibly low.  That is hurting sales & affordability.  “This latest decline could be due to the fact that home prices are rising way fast. It could also be that job creation began to stall in the last couple of months, so consumer confidence was dented,” said Lawrence Yun, chief economist for the association.  “No alarm or anything worrisome about the latest monthly decline.”  There were just 1.28M homes available for sale at the end of Nov.  That is down 22% from a year earlier & represents a  2.3-month supply at the current sales pace, the lowest inventory count since the Realtors began tracking this metric in 1982.  The number of new listings is actually up about 10% from Nov 2019, but demand is sucking up that supply quickly.  Homes sold at the fastest pace on record, spending an average of just 21 days on the market.  Last year, homes were selling in 38 days, which was also considered fast.  The growing imbalance between supply & demand kept home prices rising faster than what might be healthy for the market.  The median price of an existing home sold in Nov was $311K, a 14.6% increase from Nov 2019.  This measure of the median price is indicative of where sales are most active, which is on the higher end of the market.  Sales of homes priced under $100K were down 22% from a year earlier.  Those priced $100-250K were up just 2%.  Sales on the higher end of the market — $750K-$1M — were up 85% from a year ago.  Low mortgage rates are helping fuel demand at every price.  The average rate on the 30-year fixed mortgage was slightly over 3% for much of Oct but then sank in Nov to the 2% range & hovered around record lows for most of the month.  That gave buyers more purchasing power, but also added heat to already overheating home prices.  Sales of newly built homes in Oct, as measured by signed contracts, were a striking 41.5% higher than Oct 2019.  Builders have been benefiting from the shortage of existing homes for sale, but they are struggling to keep up with the demand.  Even though Dec marks the traditionally slower season in housing, buyer foot traffic as measured by lock-boxes on the front door of homes for sale was up 16% from a year ago.  The National Association of Realtors is now predicting total 2020 home sales to total about 5.7M, the highest level in 14 years.

Existing home sales fell for the first time in 5 months in November

Markets are churning as investors weigh the virus relief package (which has plenty of unrelated pork).  Too bad this wasn't approved months ago when it could have done more good for the economy.

Dow Jones Industrials

 






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