The Daily Difference: Market Update February 24, 2014

This week, housing will be front and center. Existing home sales were released last Friday, indicating a slowdown. Year over year, home sales were down 5.1%, although the median price was up 10.7%. Although supply (a decrease from 4.9 months to 4.6 months) could be blamed for the contraction, it is suspect that sales fell more in the West (-7.3% in warm California) than in the Northeast (-3.1%) and Midwest (-7.1%). Tuesday:

• S&P Case-Shiller Home Price Index:  Although accurate, this 20-City index, has a significant lag: tomorrow’s numbers will report on home price changes in December. The index has had good momentum (up 13.8% on the last reading), but will be watched closely given the recent softness in other housing numbers. I wouldn’t expect weather to play a significant factor until next month.
• Consumer Confidence:  Although this number has been climbing continuously, most will be watching the expectations component, which peaked this summer. Nevertheless, confidence is expected to continue its slow growth and should indicate month over month gains in consumer spending.

Wednesday:

• New Home Sales: the last two months have seen decreases of 7% and 3.9%, respectively. Supply to sales has increased, giving hope we will see a rebound in this number. Nevertheless, given new homes’ small portion of overall housing supply, I would not expect this number to move the market significantly.

Thursday:

• Durable Goods: This number, excluding the volatile transportation component, is expected to contract by -0.4%, partially due to bad weather (I think I’ve seen this excuse before).
• Jobless Claims:  The consensus number is in line with the 4 week moving average of roughly 338k; however, the continuing claims number (which has been increasing) will be watched closely.

Friday:

• Compared to last quarter, this number should be a disappointment, although last quarter’s number was boosted by inventory buildups. If final sales see a healthy increase in this quarter’s number, expect last quarter’s number to be legitimized and the Hawks to start screaming for an increase in rates and declaring a full recovery. The consensus is for growth of 2.5% quarter over quarter.