Weekly Update 11/21/2025: Earnings Season Concludes
- Walmart reports another strong quarter
- Boeing secures more orders
- Existing home sales rise
Economic Data and the Fed
With the government reopen, investors are eager to start receiving precious data points to better inform their decisions. However, getting the U.S. government back to operating speed is not like turning on a light switch. It is going to take weeks in some cases and maybe months in others to get back to a steady pace of reports. For example, though we got data for September’s nonfarm payroll yesterday, the Bureau of Labor Statistics could not collect October household data, which means October will be the first time the agency has foregone publishing a monthly employment report. November’s report will not be published until December 16, more than a week later than originally scheduled. As a result, it will come too late to inform decisionmakers in the Federal Open Market Committee (FOMC) which will meet and decide the latest monetary policy on December 10.
Minutes of the Fed’s October meeting were released on Wednesday after the customary three week delay. It showed “several” policymakers were against lowering the Fed’s benchmark federal funds rate. “Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year,” the minutes said. Once the data delay from the BLS about the jobs report hit the news wire, futures markets began to price in a much lower probability of a rate cut next month. Odds fell to around 28% for a change next month versus the near 46% level that was in place beforehand. One would think It would be wise not to make decisions on a $23 trillion economy without the benefit of data on that economy. It would be akin to operating on a patient without the latest lab results. Lest we forget—the government is fully funded only through the end of January. We could go through this all over again in about two months’ time! Those odds went up to the 60% range this morning when Federal Reserve Bank of New York President John Williams said there was room for a cut in the “near term.” Therefore, readers will have to stay glued to this space to find out the latest as it unfolds.
For the data that was released this week, there are some conclusions to draw. Nonfarm payrolls rose 119,000 in September, but the unemployment rate continued to rise. Manufacturing, transportation and warehousing and business services shed jobs in that month offset by gains in health care. Average hourly earnings rose 3.8% year-over-year which provides further ammunition for those members of the Fed who would like to keep rates steady due to an inflationary environment that is getting no closer to the stated 2.0% target. These figures were before the federal government shutdown for the longest time period in its history. Yet, separate data released yesterday showed initial applications for unemployment fell to a three-week low in the period ended November 15, according to the Labor Department. Continuing claims, on the other hand, rose in the prior week to the highest level since 2021. Thus, as usual, there are a lot of crosscurrents making clear-cut conclusions on the labor market elusive. That said, an outdated report is unlikely to hold large sway over the decision makers in the FOMC. While unemployment did tick higher, so did average hourly earnings. Looking deeper at the numbers, the rise in joblessness might be more due to increased participation which increased the amount of people in the labor force overall rather than a sharp uptick in pink slips.
On the housing front, lower mortgage rates spurred existing home sales higher in October, according to data from the National Association of Realtors (NAR). Previously-owned homes data showed that metric reached an annual rate of 4.1 million last month, slightly above the consensus in a Bloomberg survey of 4.08 million. The median sales price rose 2.1% to $415,200. Mortgage rates fell to 6.3% last month from nearly 7% in May. Homes remained on the market for an average of 34 days in October, the longest amount of time for any October since 2019. Will Fed rate cuts help spur further buyer demand? Potentially, but it’s no guarantee. Mortgage rates might follow the Fed lower in such a scenario, but a prior rate cut was met with higher rates when fears of inflation became dominant. More importantly, NAR Chief Economist Lawrence Yun commented that for sales to return to pre-Covid levels, when annualized sales were closer to 5.4 million, “it requires drastically larger supply. We’re not seeing that.” In June 2019, existing home sales inventory was 1.92 million during the peak of selling season. In June of this year, it was 1.54 million, or 20% lower. Changes in rates at the margin is likely to get some homebuyers off the fence, but it will take a true change in the supply dynamic to make that a true demand wave. That is going to be a heavy task given that the recent National Association of Home Builders/Wells Fargo survey showed that an index of market conditions was poor. A reading of 38 in November was one point higher than in October—a value below 50 means builders see conditions as poor. About 65% of builders are using sales incentives to move inventory, unchanged from the prior two months, suggesting that putting even more supply on the market is not tops of the list of many builders right now.
Company Events
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