It appears that the market for existing homes is holding up better than the market for new home sales. We are still concerned about the housing market cooling off.
Energy prices are dropping, and consumer spending is holding up despite rising unemployment . These are encouraging things the market is recognizing.
This is probably going to keep the Fed concerned about inflation. If the housing market is still healthy, policy-makers will probably continue to raise interest rates.
The October home sales data were strong, but we are seeing more moderate price increases for new homes suggesting that the housing market is gradually cooling off.
The bond market liked the inflation data. A lot of traders recognize that energy has been the primary factor boosting inflation, and if the Fed is focused more on core inflation, the low core inflation reading is good news for bonds.
The bond market had been thinking that the weak economic numbers that we've seen would cause the Fed to think twice about raising rates,
Inflation is creeping up, but it's not out of hand. I think that's pretty important. The bond market may have discounted a worst-case scenario over the last couple of months on inflation, and now maybe traders won't have to worry about the Fed moving too fast.
If sales can be sustained at this level, that would help support housing construction, but inventory of new homes is still increasing. The housing market is cooling off, but not dropping sharply.
The housing market is cooling off, but not too much, and inflation looks relatively benign.
The lower-than-expected number of new jobless claims shows that the labor market is continuing to improve. It suggests that the economy is strong and that companies are feeling more comfortable about hanging on to workers.
The jobless claims drop shows good strength in the labor market at the end of the year. It shows that the economy has recovered after the hurricanes and is heading into the new year with good momentum and good job prospects.