Week Ahead on Wall Street: Housing Resilience

Roof of Resilience

Whew. Not only did we get past last week with the rally intact, but the market is at new highs and there isn’t anything obvious on the calendar that could disrupt the good vibes in the near-term.

Of course, euphoria rarely lasts forever, so it’s fair to question how much more juice is left to squeeze from the artificial intelligence theme that powered the market last week. But it’s also important to recognize that other areas have held their own, including some possibly surprising ones.

Housing-related stocks, for example, have actually outperformed the S&P 500 of late. Yes, that same housing market that has dealt with extreme upheaval recently.

The home loan refinancing boom of 2020-21 helped many homeowners get a lower mortgage rate. But with rates as high as they are now, not many are clamoring to sell their current home if it means getting another mortgage for a new place at a higher rate. That has contributed to the big decline in mortgage applications and existing home sales, exacerbating an already existing structural housing shortage.

Moreover, a solid labor market and income growth have kept home prices from falling. Even so,there will always be an underlying demand for homes: partners move in together, families grow, kids leave the nest, needs evolve. Past performance is no guarantee of future results, but housing-related stocks (for example the SPDR S&P Homebuilders ETF) have benefited from these factors. That’s especially true for some of the big homebuilders: Their exposure to the new versus the existing home market, which has faced a lesser downturn of late, their ability to provide mortgage rate buydowns to spur demand, the structural housing shortage and strong economy all serve as tailwinds.

At least for now. It doesn’t take much to imagine the economy eventually weakening and the current tailwinds morphing into headwinds, but for now the present is one of resilience and all-time highs.

Economic and Earnings Calendar

Monday

January New Home Sales: While only a minority of home transactions in any given month come from new constructions, these home prices tend to be more cyclical and give insight into developing trends.

February Dallas Fed Manufacturing Activity: This is the Dallas Fed’s survey of manufacturing executives in the region on business conditions and their outlook.

Fedspeak: Kansas City Fed President Jeffrey Schmid will give a speech on the economic and monetary policy outlook.

Earnings: AES (AES), Domino’s Pizza (DPZ), Fidelity National Information Services (FIS), ONEOK (OKE), Public Service Enterprise Group (PEG), and SBA Communications (SBAC).

Tuesday

January Factory and Durable Goods Orders: These metrics give insight into underlying trends for leading cyclical indicators.

December FHFA House Price Index: This is a broad measure of single-family house prices released by the Federal Housing Finance Agency.

December S&P CoreLogic Case-Shiller Home Price Index: This is a private sector measure of national home prices. After a period of slight decline in the second half of 2022 and early 2023, the index returned to growth and is now at record highs.

February Conference Board Consumer Confidence: How consumers feel about economic conditions may affect their spending habits. This survey places a particular focus on job availability and the state of the labor market.

February Richmond Fed Manufacturing Activity: The Richmond Fed’s survey of manufacturing executives in the region on business conditions and their outlook.

February Richmond Fed Non-Manufacturing Activity: The Richmond Fed’s survey of services industry executives in the region on business conditions and their outlook.

February Dallas Fed Non-Manufacturing Activity: This is the Dallas Fed’s survey of services industry executives in the region on business conditions and their outlook.

Fedspeak: Fed Governor and Vice Chair of Supervision Michael Barr will speak at the Conference on Counterparty Credit Risk Management.

Earnings: Agilent Technologies (A), American Electric Power (AEP), American Tower (AMT), Axon Enterprise (AXON), AutoZone (AZO), Constellation Energy Co (CEG), Devon Energy (DVN), eBay (EBAY), Extra Space Storage (EXR), First Solar (FSLR), Henry Schein (HSIC), Lowe’s Companies (LOW), Norwegian Cruise Line Holdings (NCLH), Pinnacle West Capital (PNW), Republic Services (RSG), JM Smucker (SJM), Sempra Energy (SRE), and Universal Health Services (UHS).

Wednesday

Q4 GDP Second Estimate: The primary measure of economic growth in the United States, which is measured as total expenditure on a country’s goods and services. This will be the second reading of Q4 activity.

Q4 GDI First Estimate: An alternative measure of economic growth in the United States, which is measured as all income earned from the production of a country’s goods and services. Theoretically, this should equal GDP since one person’s spending is another person’s income, but differing data sources used between the two means there is often a difference between the two which is referred to as the statistical discrepancy.

January Wholesale and Retail Inventories: Wholesalers and retailers often operate as intermediaries for the sale of manufactured products, serving as a key part of the goods supply chain.

Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.

Fedspeak: Atlanta Fed President Raphael Bostic will take part in a fireside chat on the economic outlook and monetary policy. Boston Fed President Susan Collins will take part in a fireside chat and Q&A at the Tuck School of Business at Dartmouth College. New York Fed President John Williams will deliver keynote remarks at the Long Island Association Regional Economic Briefing.

Earnings: Salesforce (CRM), HP (HPQ), Monster Beverage (MNST), NRG Energy (NRG), ViacomCBS (PARA), TJX Companies (TJX), Viatris (VTRS).

Thursday

January Personal Consumption Expenditures Price Index: The Fed targets this inflation measure for its price stability mandate and believes PCE to be the best measure of consumers’ spending habits.

January Personal Income and Spending: These numbers give insight into how Americans are doing, which is important since consumer spending accounts for about two-thirds of economic growth in the United States.

February Kansas City Fed Manufacturing Activity: The Kansas City Fed’s survey of manufacturing executives in the region on business conditions and their outlook.

Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Jobless claims have continued to show a labor market that remains strong despite having cooled.

Fedspeak: Atlanta Fed President Raphael Bostic will take part in a fireside chat about the economic outlook, monetary policy, and the banking industry at the 2024 Banking Outlook Conference. Chicago Fed President Austan Goolsbee will give remarks on monetary policy. Cleveland Fed President Loretta Mester will speak on financial stability and regulation at the 2024 Bank Regulation Research Conference. New York Fed President John Williams will participate in a moderated panel discussion at the Citizens Budget Commission 92nd Annual Gala.

Earnings: Autodesk (ADSK), Bath & Body Works (BBWI), Best Buy Co (BBY), Cooper Companies (COO), Evergy (EVRG), Hewlett Packard Enterprise (HPE), Hormel Foods (HRL), NetApp (NTAP), Dentsply Sirona (XRAY).

Friday

February ISM Manufacturing PMI: This index from the Institute for Supply Management tracks how purchasing managers across the manufacturing sector feel about the business environment.

January Construction Spending: Construction data is a leading indicator of business activity.

February Wards Total Vehicle Sales: Cars are a big ticket item for consumers, so underlying vehicle sales trends can help shine a light on demand for durable goods.

Fedspeak: Fed Governor Christopher Waller will discuss a paper at the 2024 US Monetary Policy Forum and participate in moderated Q&A. Atlanta Fed President Raphael Bostic will participate in a moderated discussion on topics such as the economic outlook and real estate trends. San Francisco Fed President Mary Daly will discuss a paper at the 2024 U.S. Monetary Policy Forum. Fed Governor Adriana Kugler will give a speech about the Fed’s dual mandate.

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