Insights

The 4 Economic Releases for Wednesday

Today the economic calendar started with the Mortgage Bankers Purchase Applications release at 7 a.m.  This is a weekly index and the percentage change came in at down 11.6%.  While this is a sizable drop, it could be explained as going into the holidays, buyers may be more occupied with shopping for gifts than homes.  The numbers for this release should be watched carefully after the holidays to see if a trend resumes or if this drop is the beginning of a more noticeable slowdown.

Personal Income and Outlays was next up with the month-over-month change for Personal Income increasing 0.4% vs. its expected increase of 0.5%.  On a year-over-year basis personal income dropped 0.3%.  Compared to last month the consumer has more to spend which is a positive as 70% of our economy is supported by consumer spending.  The Consumer Spending number came in up 0.5%, just slightly above the rise in Personal Income but lower than the 0.6% expected.  This would seem to indicate, all else being equal, that spending is rising faster than income and could be explained by increased holiday purchases.  The Core PCE price index was expected to rise by 0.1% but stayed flat indicating prices are not experiencing any inflationary effects.

Consumer Sentiment was released at 9:55 a.m. and came in at 72.5, which is lower than was expected (73.5) and also lower then the previous number for November (73.4).

New Home Sales were released at 10 a.m. and missed by a wide margin, coming in at 355K vs. the 440k that was expected.  The consensus range was 415k to 460k, so the actual number even came in far below the range.  You would think economists to be cognizant of holiday effects when setting these estimates and ranges, so this large miss, at the very least, does not confirm yesterdays Existing Home Sales number, which came in strong.  Difficulty in the real estate market is no big surprise, but the ray of hope emanating from yesterdays report can more logically be looked at as less reliable.

The Dow Jones Industrial Average, which was at 10,474 before the New Home Sales Report, sold off and is currently trading 10,443 (10:27 a.m.).  At 9:55 a.m. the SPDR Gold Trust (NYSE: GLD) was trading $106.41 but took off on the two releases, trading up to $107.06 (10:34 a.m.).  The PowerShares DB US Dollar Index (NYSE: UUP) saw a sharp drop at 10 a.m. on the New Home Sales number.  The UUP dropped sharply from $23.115 to $23.0641 within the next 5 minutes.  This is an ETF where 5 cents can be a move for the whole day, but the reaction to the New Home Sales Number was 5 cents in 5 minutes.  Currently the UUP is trading at $23.02 (10:34).