The markets surged after Federal Reserve Chairman Jerome “JP” Powell said that current interest rates are “close to” neutral after saying they were “way below” neutral just two months ago. This news was a signal that the Fed might not increase rates next year as much as markets had been expecting. It seems JP blinked in the face of criticism which included the White House as well as CNBC talking head Jim “Mad Money” Cramer. Maybe JP took into account the slowing global growth picture even though things in the US are good. The Dow closed up 617 points at 25,366 on heavy volume. This was the biggest one-day gain in over 8 months.
Sales of newly constructed homes fell 8.9% in the latest reading and have now declined for 4 of the past 5 months although last month’s figure was revised higher. The main cause of the decline seems to be affordability. It was reported separately that while wages have grown 25% since 2010, home values have gone up 40% in the same period. When you throw higher interest rates into the mix it does boost the cost of getting a new home. Inventories of new unsold homes are moving up and now sit at a level not seen since 2009. Medium new home prices are down 3.1% over the past year but the pace of new homes being built is still well below long term averages.
Airline stocks have taken off recently and the gurus are saying that falling oil prices coupled with airplanes that are packed have put airline stocks in a sweet spot. Shares of Seattle based Alaska Air have been down over the past year but along with the rest of the sector has recently begun to fly. Alaska Air is also expanding beyond SeaTac Airport which is jammed and will soon be offering flights from Paine Field up in Everett, WA starting February 11. Paine Field is where Boeing has its main production facility.
GM is shutting plants in the US and Canada but a new car company in Illinois called Rivian is introducing a new electric pickup. Check it out on our FacePlant page.
Have a good evening.