Tuesday, December 20, 2022

Pre-market futures saw the new data on housing this morning and swung from mildly negative to mildly positive, as mixed results between Starts and Permits show a housing sector outperforming on the former but underperforming on the latter (more on both of these below). The Dow now looks to open +35 points, the S&P 500 -5 points and the Nasdaq -30.

Housing Starts for November outpaced expectations, running about in-line with the previous month: 1.427 million seasonally adjusted, annualized units was notably ahead of the 1.40 million expected, and down just a touch from October’s 1.43 million. Month over month, we saw -0.5% growth in Starts, but expectations were for -1.8%.

Building Permits, a proxy for future starts, was on the other side of this: 1.342 million was well behind the 1.48 million expected last month, and even lower than the 1.51 million for October. This is a month-over-month contraction of -11.2%, whereas -3.0% was expected. This also marks the lowest monthly print since June 2020, just three months into the pandemic.

Whereas we’ve gotten used to see most of the weakness in housing starts come from the single-family side, in this report it was multi-family that disappointed to a far greater degree: -18% year over year, compared with -7% in single-family. And these results came in a month that saw mortgage rates fall nearly 100 bps, from north of 7.3% to just south of 6.5%. This mortgage rate is the lowest we’ve seen in three months.

So while it looks as if lower mortgage rates had a demonstrable positive effect on starts, it did nothing on the permits side. We don’t expect a new peak in mortgage rates to be in the cards going forward, so it’s tough to get a clear read on why the housing market would look weaker in the future than in the present. Perhaps we ought not make too much of one month’s numbers.

Fiscal Q2 earnings for General Mills (GIS Quick QuoteGIS - Free Report) came in better than expected this morning: earnings of $1.10 per share outpaced the Zacks consensus by 4 cents, while sales for the quarter came in at $5.22 billion performed better than expected by +1.37%. The parent of Cheerios, Yoplait and Blue Buffalo, just to name a few, also hiked guidance. However, shares are selling off -3% on the report; perhaps it’s an old fashioned “sell the news” story: the stock is up +25% year to date.

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