Stocks fall amid fears of new variants; Mostly positive economic data

Shares ended this short week with a sharp drop in concerns over a new variant of the coronavirus. Friday’s drop came in a holiday shortened session typically characterized by light volume, so it’s hard to say if the market reaction would have been this harsh in a normal session.

The S&P 500 had gained 0.11% before the close of the exchanges Thursday on the occasion of Thanksgiving. Despite the short week, plenty of economic data has been released, with most economists’ estimates exceeding. Meanwhile, more companies reported quarterly profits, including big names like Best Buy (BBY), Dell (DELL), HP (HPQ), Gap (GPS) and others.

Prices rise faster than incomes

PCE data for October data in the above estimates with personal income and spending up 0.5% and 1.3% respectively, with economists only expecting a gain of 0, 2% and 1.0%. However, real personal disposable income fell 0.9% year over year as prices rose at a faster pace than income.

PCE prices meanwhile met analysts’ expectations for a 0.6% increase and a 0.4% increase in base PCE prices. Prices rose faster in October, as prices rose 0.4% in September, with basic prices rising 0.2%. Base prices are now up 4.1% year-on-year, down from 3.7% in September and 3.6% in the previous three months.

Other economic data

Initial jobless claims fell well below what economists expected, with claims falling to 199,000 from 268,000 the week before. Estimates were for a much smaller drop to 265,000 claims. The report marks the first time that initial claims have fallen below 200,000 since before the pandemic and is below the pre-COVID-19 average. Just over 200,000 was typical at the start of 2020 and will be crucial to seeing if claims can stay around that number going forward or if they rise again next week.

Home sales were mixed in October, with existing sales falling from 6.29 million to 6.34 million, beating estimates of a decline to 6.19 million. However, new home sales fell to 745,000 as analysts expected 800,000 sales. To make matters worse, September’s numbers have been revised from 800,000 to 742,000.

Finally, durable orders fell again in October, falling 0.5% after losing 0.4% in September. Economists expected a slight increase of 0.2%. The biggest losers in October were capital goods which fell 4.0% and a 2.6% drop in transport.

In total, the S&P 500 lost 2.2%, the Dow Jones Industrial Average fell 1.97%, and the NASDAQ fell 3.52%.

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