This was a fascinating week in regards to economic news. But before I get to that, let’s take a moment to see what the market taught us this week.
- A lot can happen in a week, so it pays to check my Portfolio Grader rankings for your stocks every Monday morning. This week, 38 big blue chips were upgraded or downgraded—find out which here.
- With all of the latest from the Fed and its zero-interest rate policy, I’ve been hearing the B-word thrown around a lot more: Bubble. But while some pundits would have you believe that the bubble is in the stock market, I see a much more obvious threat elsewhere—full details on where the bubble is brewing and what you can do to protect yourself here.
- Let’s face it. The stock market is now addicted to the Fed’s 0% interest rates policies, which I’m now calling Quantitative easing to "infinity" and Operation Twist to "eternity." And this week, the Fed surprised essentially no one by voting to stay the course—click here to read my take on this.
- I know that during earnings season, I focus mainly on sales and earnings growth. But even though we’re in the lull between earnings, we’re seeing interesting analyst activity regarding some of the hottest names on Wall Street. While the market may have not reacted to these upgrades (and downgrades) just yet, I want you to be prepared for what’s to come the next earnings season—so read all about it here.
The Jobs Market
Last week, new jobless claims ticked up 2,000 to an annual rate of 336,000. Economists had expected claims to climb to a rate of 345,000. Last week’s claims were also revised up by 2,000 to 334,000. Meanwhile, the four-week moving average gapped down by 7,500 to 339,750, the lowest level since February 2008. Jobless claims have been hovering around a five-year low for some time now. This is good news because it reflects a sharp decline in layoffs. However, new hiring still remains somewhat stagnant; this may explain why the Fed insists that it must continue with its efforts to reduce the unemployment rates to 6.5%.
The Housing Recovery
In February, homebuilders ramped up housing starts by 0.8%, reaching an annual rate of 917,000 units. This came above the consensus estimate of a 905,000 rate. Meanwhile, January housing starts were revised up to 910,000. Most notably, construction of single-family homes jumped 0.5% to a rate of 618,000 units.
Last month, building permits also jumped 4.6% to an annualized level of 946,000. This also topped the 915,000 consensus estimate. With these latest results, single-family housing starts and building permits are now at the highest level since June 2008. However, keep in mind that total housing starts are still below pre-recession levels, so we still have room for growth.
In February, sales of existing homes advanced 0.8% to an annual rate of 4.98 million units. This met economists’ expectations yet also represents the highest sales pace in three years. At the same time, the January sales rate was revised up to 4.94 million units. As further evidence of an improving housing market, it now takes an average of 74 days to sell a home, compared with 97 days this time last year. Also encouraging is that median home prices rose 11.6% to $173,600 in the past 12 months.
The Big Picture
In February, the Leading Economic Indicators (LEI) rose by 0.5%. This came above economists’ consensus estimate of a 0.4% gain. Eight of the 10 LEI components rose, including building permits, higher stock prices and fewer jobless claims. The two components that dragged the index down were nondefense capital goods orders as well as consumer expectations for business contributions. This is the third straight month that the LEI has risen; it rose 0.5% in January and 0.4% in December. This is a good sign that we’re starting to see broad-based economic improvement and it bodes well for first-quarter GDP growth.
That’s all I have for this week. Have a great weekend, and I’ll touch base again on Monday morning.
P.S. Want to learn how to use Portfolio Grader like a pro? Whether you’re new to the stock screening tool or an old hand, I’ll be giving a free webinar that covers the ins and outs of this valuable service. So please block off some time on your calendar this Monday, March 25 from 9:50-10:35. My presentation is part of the eMoney Show series so to join all you need to do is register here: http://www.moneyshow.com/eshow/stocks_etfs/eMoneyShow/?scode=030904