Market 12/28: Update on labor market and housing market in the last week of 2023

Initial jobless claims rise higher than expected

Initial jobless claims for the week before Christmas increased +12,000 to 218,000, higher than expected but still near historic lows.

→ Companies are quite hesitant to cut staff - labor demand remains stable.

The 4-week average initial claims showed little change, reaching 212,000 - the lowest since October.

Continuing jobless claims rose slightly to 1.88 million in the previous week, the highest in 2 years.
- But the seasonally adjusted figure is on a downward trend.

Labor market in 2024 is likely to deteriorate soon

According to the Fed's regional survey, hiring trends are expected to decline next year to limit wage pressure on businesses — easing inflation pressure.

Manufacturing employment expectations in the Philadelphia region, including Delaware, Pennsylvania, and southern New Jersey, are at the lowest since 2009.

Pending home sales at historic low

Pending home sales unchanged from November and down more than -5% YoY.

Pending home sales index at record low 71.6, lowest since 2001.

→ Real estate market remains sluggish due to low inventory and high home prices, despite cooling interest rates.

Market expectations for the real estate sector will improve more in 2024 due to the impact of gradually declining mortgage rates, which also have a certain lag to affect demand.

Lawrence Yun, NAR: "Declining home loan rates did not spur more homebuyers in November, but it has stimulated interest.", "home sales will improve in 2024."

US Treasury bond yields drop across the board after successful auction

5Y bond auction worth 58 billion USD sold at yield of 3.801%, lowest high yield since May/2023.

Auction results caused 10Y yield to drop to 3.79%. Yields on 5- to 30-year bonds fell at least 10bps on the same day.

The 2-year bond auction on Tuesday also delivered lower-than-expected yields.

→ Investors have accepted more modest returns as confidence in early Fed rate cuts grows stronger.

Bond market heading for second straight monthly gain, as inflation gradually reaches Fed's target.

According to CME Fedwatch Tool, investors predict 7 rate cuts in 2024, far exceeding Fed's guidance.

WTI oil price unexpectedly falls after signs of rising inventories

According to API report:

Crude oil: +1.837 million barrels (forecast -2.4 million barrels)
Gas: not updated (forecast +100k barrels)
Distillates: not updated (forecast +700k barrels)

WTI oil price fluctuates below 74 USD/barrel.

First time since September/2022, WTI's MA50 crosses below 200-day MA200

→ Sign that oil prices will fall further in the near future.

On the other hand, global oil prices have risen about 9% from December's low due to escalating Red Sea tensions, despite US protection pledges.

Number of commercial ships rerouting around Cape of Good Hope is increasing.

Half of container ships in the Red Sea have rerouted after attacks, causing Suez Canal traffic frequency to continue declining:

Other news:

Hong Kong home prices fell 2% in November, the lowest since 2017 due to high interest rates limiting purchasing power.
- Conversely, urban rental prices have risen to a 4-year high.

Apple shares rose 0.3% premarket as the International Trade Commission ITC temporarily halts ban on selling Apple Watch models.

China: Foreign net investment into China had just shown a slight upward trend last week, but continued the dismal situation after the government's game restrictions (affecting Tencent shares and tech companies).
- Overall, investment in China has plummeted severely since Country Garden defaulted. Currently, investors have a quite negative view of this market.
- Nearly 90% of the money poured into Chinese stocks in 2023 has been withdrawn net, adding to doubts and concerns about the country's economic prospects.

Office building prices have fallen more than 30% this year. A 20-story office building in downtown San Francisco was sold for 148 million USD in 2014, but is now listed at only 80 million USD (down 46%).

The delinquency rate on credit cards at small banks has reached 7.5%, higher than the rates for small and large banks during the 2008 crisis.
→ Consumers are still suffering from the impact of inflation and high interest rates.

Boeing proposes fleet-wide inspections of 737 MAX aircraft after finding loose bolts during routine maintenance and another incident involving improperly secured hardware.

USD continued to decline for the 6th consecutive session on Thursday amid rising expectations of Fed rate cuts.
- WSJ Dollar has fallen another 2.6% in the month.