The U.S. Equity Markets were mixed last week as the large cap indexes declined fractionally while the midcap Russell 2000 advanced to record highs. The year has also provided a mixed bag for large cap tech as chip stocks continue to roll while software stumbles. Our guess is that this is a glimpse into our near-term future, two steps forward and one step back. The underlying economy remains resilient amid an easing of inflation (see Consumer and Producer Price Index below). However, the headlines coming out of Washington will keep investors somewhat on edge.
· President Trump proposed a one-year 10% cap on credit card interest rates. Ironically, Trump has reached out to Massachusetts Senator Elizabeth Warren for help with this matter. Banking officials replied that this would imply offering unsecured loans at a loss, something banks would not do. Nonetheless, despite posting good earnings, banks and credit card processors (Visa, MasterCard) tumbled.
· Taiwan Semiconductor (TSM), the world’s largest contract chipmaker, reported a 35% rise in fourth-quarter profits, numbers that helped push other chip stocks higher. Of note was the statement from TSM’s Chairman C.C. Wei that “our conviction in the multi-year AI megatrend remains strong, and we believe the demand for semiconductors will continue to be very fundamental.” This past week the company also announced a $250 billion initiative to increase production capacity in the United States.
· According to Freddie Mac “late last week, mortgage rates dropped, driving the weekly average down to its lowest level in more than three years. The impacts are noticeable, as weekly purchase applications and refinance activity have jumped, underscoring the benefit for both buyers and current owners. It appears that housing activity is improving and poised for a solid spring season.”
· Really? According Beyond the News from MFS and sourced to the Washington Post and Yahoo News, “family spending on youth sports has eclipsed $40 billion annually. To help families with the financial burden of youth sports, a Pennsylvania Senator has proposed legislation to create a $3,000 tax credit per child for youth sports expenses.” Paradoxically, childhood obesity in the United States is at an all-time high.
It’s The Economy…”
· Sales of Existing Homes rose 5.1% to a Seasonally Adjusted Annualized Rate (SAAR) of 4.350 million units during December from 4.140 million during November (1.4% y/y). According to the National Association of Realtors (NAR) total housing inventory at the end of December was 1.18 million units, down 18.1% from November but up 3.5% y/y). Unsold inventory slid to a 3.3-month supply at the current sales pace, down from 4.2 months in November and to its lowest level since March 2025. The report also noted that the median price for all existing homes fell 1.12% to $405,400 in December (0.4% y/y) from $410,000. (Source, National Association of Realtors)
· Retail Sales rose 0.6% in November (3.3% y/y), after easing 0.1% in October. Spending on Motor Vehicle & Parts rose 1.0% during November (-0.7% y/y) after falling 1.6% in October. Retail Sales Excluding Motor Vehicles & Parts rose 0.5% (4.3% y/y). Two key components of this report, Sales at Gasoline Stations rose 1.4% during November (3.2% y/y) after sliding 1.2% in October while Restaurant and Drinking Place Sales rose 0.6% during November (4.9% y/y) after rising 0.1% in October. (Source, U.S. Census Bureau)
· Prices at the wholesale level as measured by the Producer Price Index rose 0.2% during November after edging 0.1% higher in October. Over the past year the PPI has risen 3.0%, down from 3.3% in July and from a peak rate of 11.7% during March 2023. Energy prices jumped 4.6% during October (3.5% y/y) after falling 3.2% in October. Finished food prices were unchanged during November (4.0% y/y) after falling 0.4% in October. Ex- food and energy, the core PPI rose 0.2% during November (3.3% y/y), after rising 0.4% in October. Prices for Intermediate Goods rose 0.6% in November (3.6% y/y), after falling 0.3% in October. (Source, U.S. Bureau of Labor Statistics)
· Inflation at the Retail Level as measured by the Consumer Price Index rose 0.3% during December (2.7% y/y), after rising 0 3% during December. The CPI has fallen from a y/y high of 9.1% during June 2022 but is at its highest since January. Energy prices rose 0.3% during December (2.3% y/y) after rising 1.5% in September. Food and beverage prices rose 0.7% (3.1% y/y) during December after increasing 0.2% in September. The cost of shelter rose 0.4% during December (3.2% y/y), after rising 0.2% during September. Excluding food and energy, the core CPI rose 0.2%, after rising by 0.2% during September. Over the past year the core CPI has risen 2.6%, well below the September 2022 peak of 6.6%. (Source, U.S. Bureau of Labor Statistics)
· The U.S. Census Bureau reported that New Single-Family Home Sales slipped 1,000 during October to a Seasonally Adjusted Annualized Rate (SAAR) of 737,000 from 738,000 during September (18.7% y/y). Sales of New Homes have fallen by 28.52% from their peak of 1.031 million in October 2020 and 42.38% from the peak in July 2005 of 1,279,000 units. The median sales price of a new home fell 3.3% (-8.0% y/y) to $392,300 in October from $405,800 in September, the lowest level since July 2021. The average sales price of a new home rose 3.0% (-4.6% y/y) to $498,000 in October from $483,500 in September. The average price was 7.98% below the high of $541,200 in July 2022. These sales prices are not seasonally adjusted. The number of unsold new homes on the market remained at 488,000 (1.7% y/y) in October after declining four straight months. The latest was 4.72% above the low of 466,000 in October 2022. The seasonally adjusted months’ supply of new homes for sale remained at 7.9 months in October when compared to September. The median number of months a new home stayed on the market rose to 2.7 months during October from 2.4 during both September and August, well below a high of 5.1 months in March 2021. (Source, U.S. Census Bureau)
Economic Reports scheduled to be released this week, include the following – on Wednesday, October Construction Spending; on Thursday, Initial Claims for Unemployment Benefits; and, on Friday, the Final Reading of Consumer Sentiment from the University of Michigan.
Several potentially market moving companies are scheduled to report earnings, to include Netflix (NFLX), 3M (MMM), US Bancorp (USB), Charles Schwab (SCHW), Johnson & Johnson (JNJ), Kinder Morgan (KMI), Travelers (TRV), CSX (CSX), Capital One Financial (COF), Freeport McMoRan (FCX), LVMH (LVMUY), GE Aerospace (GE), Procter & Gamble (PG), Intel (INTC), Abbott Labs (ABT), KLAC (KLA), Intuitive Surgical (ISRG) and SLB (SLB).