State of the Market

Recent economic releases and data highlights:

Federal Reserve Interest Rate Decision: The Federal Reserve kept its benchmark interest rate at 5.25%-5.50% in July. This marks the eighth straight meeting without a change, aligning with market expectations.

US ADP Employment Change: US private sector employment grew by 122,000 jobs in July 2024, the smallest increase in six months. This figure fell short of the 150,000 forecast and was lower than June’s revised 155,000 gain. The data indicates a slowdown in both job creation and wage growth.

US Pending Home Sales YoY: US Pending Home Sales declined 2.6% year-over-year in June 2024, an improvement from May’s 6.6% decrease.

US Case Shiller Home Price Index YoY: US home prices in 20 major cities rose 6.8% in May 2024 compared to a year earlier, according to the S&P CoreLogic Case-Shiller index. This increase was slightly above the 6.7% forecast but below April’s revised 7.3% gain.

Construction Spending Falls for Second Straight Month

Overall construction spending is down 0.3 percent month-over-month (MoM), according to the Census Bureau’s June estimate. That’s following a negative 0.4 percent number in May.

Spending decreased overall in both the public and private sectors:

“Spending on private construction was at a seasonally adjusted annual rate of $1,664.6 billion, 0.3 percent below the revised May estimate of $1,668.8 billion… In June, the estimated seasonally adjusted annual rate of public construction spending was $483.9 billion, 0.4 percent below the revised May estimate of $486.0 billion. ” [Census Bureau]

The graph below shows construction spending for single-family (red) and multifamily (blue).

Single-Family:

  • Declined 1.24 percent MoM.
  • Although spending is up 9.93% year-over-year (YoY), there are signs of recent weakness having been on a downward trend over the last three months.
  • Mortgage rates have dropped to the lowest levels since April 2023, following a weak jobs report.
  • The average rate for a 30-year fixed mortgage is now at 6.4%, a drop of 0.22%. Providing relief for many looking to buy a home and likely putting demand pressure on home-builders.

Multifamily

  • Increased 0.14 percent from May to June.
  • Down 7.38 percent from last June.
  • Has been sputtering with continued high interest rates.
  • The market is pricing in three rate cuts for the remainder of this year a the U.S. 10-year Treasury has dipped well below 4% and now stands at 3.799 at the time of writing.

The graph below shows YoY change in construction spending for single-family (blue) and multifamily (red).

Global Markets Rattled as U.S. Job Growth Slows and Unemployment Rises

Global financial markets experienced a significant downturn, intensifying the selloff that began last week.

The U.S. labor market showed signs of weakness in June, with only 114,000 new jobs added, falling short of expectations. The unemployment rate increased by 0.2 percentage points to 4.3%.

Compounding concerns, Thursday’s report on initial jobless claims revealed an increase from 235,000 to 249,000, surpassing analysts’ forecasts and further indicating potential economic headwinds.

From the Washington Post: “Global markets slid Monday as fears of a slowing U.S. economy sparked investor panic, resulting in some of the most intense volatility Wall Street has seen in years.”

  • The Dow dropped 2.4%, over 1,000 points, by 2PM EST.
  • The S&P 500 lost 3%.
  • Japan’s Nikkei had its worst two-decline ever, dropping 182%.
  • London’s FTSE 100 dropped more than 2 percent.
  • Bitcoin dropped over 19%, although it climbed back roughly 10%.
  • Other notable indices that dropped include: South Korea’s Kospi (-8.77%), Taiwan’s Taiex (-8.35%), Hong Kong’s Hang Sang (-1.46%), China’s Shanghai Composite (-1.54%) and Australia’s S&P/ASX 200 (-3.7%)