US Economy and Credit Markets Ended Dec. 23, 2021

Yields rose at almost all points along the US Treasury curve last week as continued uncertainty regarding the latest COVID strain suppressed risk appetites. Last Thursday was the final day markets were open before the anticipated Christmas Holiday, where ostensibly, appetites were not subdued, and on it the New Single-Family Home Sales report showed an increase of 12.4% and a corresponding drop in new home supply inventories. While the headline number was the highest of the year, there were downward revisions to prior months data, and in fact, if October's headline number were unrevised November would have registered a slight decline in sales. All told, new Home Inventories stand at 6.5 months' supply; up from an all-time low of 3.5 in 2020.  Also on Thursday, personal incomes were seen rising 0.4% in November but personal consumption outpaced this with a 0.6% gain. Over the past year, income has risen 7.4% but spending has raced ahead 13.5%. The personal consumption expenditure (PCE) index prices expanded 0.6% in November, and are up 5.7% from a year ago. Core prices, excluding food and energy, rose 0.5% in November and are up 4.7% from a year ago. Close attention is expected to remain on inflation numbers such as these into the Federal Reserve's January 25-26 and March 15-16 meetings especially after the Federal Reserve chose to double the pace at which it is winding down its pandemic bond-buying program in its December meeting. It is possible that the bond-buying program could be wound down as soon as March 2022 at which points markets will be highly interested in any possible first-half of 2022 interest rate increases. Major economic reports (related consensus forecasts, prior data) for the upcoming holiday-shortened week include; Wednesday: November preliminary Wholesale Inventories MoM (1.6%), 2.3%); Thursday: December 25 Initial Jobless Claims (N/A, 205k); Friday:December MNI Chicago PMI (62.0, 61.8).
Posted on Monday, December 27, 2021 @ 8:24 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.