At Financial Issues, we help you stay informed about the financial issues of the day. We keep you updated on what’s happening in the economy and the markets and help you understand how it impacts your financial situation. Here are my takeaways from the week ending today, May 24, 2024.
The Fed’s FOMC meeting minutes were released this week, revealing nothing groundbreaking. Federal Reserve officials expressed concern that progress on inflation is stalling, which isn’t surprising. A smattering of higher-than-expected inflation reports has led many on the committee to question whether their policy is restrictive enough. Some members indicated a willingness to take rates higher if necessary, stating that they need greater confidence that inflation is coming down before considering rate cuts that the market expects.
We received mixed housing market news this week, showing a bifurcated economy. While we hear that Bidenomics is working and we have a strong economy, it is still plagued by higher inflation driven by government spending. For those looking to buy or sell million-dollar homes, the National Association of Realtors reported a 34% increase in inventory and a 40% increase in sales for homes valued at a million dollars or more. Homeowners with low mortgage rates continue to see their net worth rise as home values increase, with prices up 5.7% year-over-year at the median level. The median home price has increased 45% since March 2020, from $281,000 pre-COVID to $407,000 now. This is challenging for first-time homebuyers facing higher prices and interest rates.
Homebuilders are benefiting from high demand due to low inventory. Existing home sales in April totaled 4.14 million, 90,000 below expectations, near 30-year lows due to high mortgage rates. Home improvement retailers and small construction companies are seeing weakness as people are not fixing up their homes to sell. Initial weekly jobless claims fell to 215,000 from 223,000 last week, slightly below expectations, but the four-week moving average ticked up to 220,000. Continuing claims, delayed by a week, increased slightly, indicating weaker hiring and fewer available jobs. The hope is that the initial claims jump of two weeks ago, which was abnormally caused by New York education workers claiming temporary benefits for spring break, was an anomaly and not a trend indicating higher unemployment.
Durable goods orders for April came in as expected, with new orders for manufactured durable goods rising 0.7% month over month, following a revised 0.8% increase in March. This marks the third consecutive monthly increase, driven by strong demand for transport equipment and other products. Orders for non-defense capital goods, excluding aircraft, rose by 0.3% in April, indicating stable business spending plans.
The AI craze has been driving capital expenditures (capex). We need capex for the corporate community to stay strong, but it is not increasing significantly. The overall capex budget is just being reallocated from other areas. Nvidia posted stellar earnings—who would have thought that we would be looking at earnings reports for a single company as an economic indicator? But Nvidia posted stellar earnings and gave great guidance, keeping the tech-heavy Nasdaq hanging on to small gains.
Nvidia’s stellar earnings and guidance kept the tech-heavy Nasdaq positive for the week, while the Dow and S&P saw losses. For the week ending May 24, the Dow is on target for a 2% loss, the S&P is down 0.6%, and the Nasdaq is up 0.25%.
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