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Financials In 2012

With the year's end fast approaching, let's review how banks and the Financial Select Sector SPDR ETF (XLF) have performed year-to-date. The XLF is up an impressive +25% year-to-date compared to the S&P 500, which is up +12.3% during the same time period. As far as the banks go, here's a breakdown:

 

  • Goldman Sachs (GS): +39.41%
  • JP Morgan (JPM): +30.53%
  • Citigroup (C): +48.46%
  • Bank of America (BAC): +105.58%
  • Morgan Stanley (MS): +23.73%

 

Financials In 2012  - image001


Retail: Sales Spot-On W Last Yr. Need to Accelerate.

Takeaway: Holiday sales are right in line with last yr. That’s not terrible, but the cadence needs to pick up as we comp a weak Jan 2012.

The trajectory of holiday sales seems to be coming in right in line with last year. That’s not terrible, but the cadence needs to pick up over the next week, because January 2012 was weak.

 

In looking at the weekly ICSC sales index – which we think is increasingly important given the shrinking size of companies participating in the monthly same store sales game – we think it is uncanny how closely 2012 tracked 2011 in the four weeks leading up to Christmas.  

 

We’ve heard forever that ‘consumers are buying closer to need’ but when you look at the weekly change by year from ’08 through ’12, it’s clear as day that this purchasing pattern is more the case today than ever before. In fact, in each of the past two years, we saw an increasing decline in sales 3-4 weeks before the Christmas holiday, but then ‘catch up’ in the 1-2 weeks prior to the big day.

 

Retail: Sales Spot-On W Last  Yr. Need to Accelerate. - sales1

 

Sales trends in 2011 and 2012 vs previous 5-year average are too close to call. To date, you can hardly tell one from the other. But as noted, last year we saw a precipitous decline in the early part of January – something that we need to successfully lap this year to keep the channel as clean as it was throughout the bulk of 2H12.

 

Retail: Sales Spot-On W Last  Yr. Need to Accelerate. - sales2

 

We’ll have more details on Wed January 2.


Eurozone: Risk Off?

10-year bond yields for various Eurozone countries remain at depressed levels after spiking in early 2012. Greece in particular has managed to quell investor fears of a default and Portugal is doing the same albeit at a slower rate. Right now, Greece’s 10-year is offering a yield of 11.90%, up 24 basis points week-over-week while Portugal is offering 6.94%, down 5 basis points week-over-week. It should come as no surprise that Germany’s low-yield of 1.32% has come down 11 basis points during the same time period.

 

Eurozone: Risk Off? - EURO10year


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NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS

Takeaway: New Home sales rose 4.4% in November. Limited supply and rising demand are working together to push home prices higher.

New Home Sales: Another Strong Print in November

New home sales rose 4.4% MoM in November to 377k (SAAR). October data was revised down from 368k to 361k making the comp easier. On a year-over-year basis, new home sales in November are up 19.7%.

 

The inventory of new homes for sale rose to 149k in November, up from 147k in October. This continues an emerging trend of rising inventory, marking the third consecutive month in which inventory has grown, albeit off an all-time low base of 141k in August. When looking at inventory on a months supply basis, November stood at 4.7 months, which was down MoM from 4.9 months. For perspective, months supply floated between 4-5 months from 1, and has been in the mid-4 to low-5 months range YTD.

 

We would expect to see inventory levels rise, as this reflects a strengthening market. This is counterintuitive, we realize, but in looking at the long history of price in relationship to inventory levels, they have a strong positive correlation.  

 

The median price of new homes sold in November rose 15% vs the prior year, a continuation of the trend we've seen year-to-date.

 

We continue to believe that home prices are heading meaningfully higher in 2013. This morning's New Home Sales data, showing a rising sales rate and falling months supply of inventory, supports our thesis.

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Sales   YoY

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   LT

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - NHS   Inventory LT

 

NEW HOME SALES: THE PACE OF SALES ACCELERATES, MONTHS SUPPLY FALLS - Median

 

Joshua Steiner, CFA

 

Robert Belsky


Jobless Claims: Missing Pieces

This week’s jobless claims numbers had 19 states omitted from the data, including California and Texas. While the data is positive with initial jobless claims falling 11k to 350k from 361k, we wouldn’t put too much faith in this data and would wait and see what next week’s numbers hold. Hurricane Sandy is no longer affecting the numbers and claims are generally trending lower, the latter of which is a tailwind we should expect to continue through February.

 

Jobless Claims: Missing Pieces  - Katrina

 

Jobless Claims: Missing Pieces  - Seasonality


JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS

Takeaway: The labor department's estimates show claims posting another solid week of improvement. We'll see how good they are at estimating next week.

Nineteen states were omitted from the jobless claims data this morning, including California and Texas. As such, the labor department had to estimate claim rates for those states. Needless to say, we wouldn't put too much stock in these numbers.

 

That said, initial jobless claims fell 11k to 350k from 361k. The prior week's number was revised up by 1k to 362k. Incorporating this upward revision, claims were lower by 12k. Rolling claims, meanwhile, fell 11.25k WoW to 357k and non-seasonally adjusted claims rose 39k to 441k. Additionally, the NSA rolling year-over-year change, which we monitor because it excludes the effects of seasonality, was -5.9%.

 

Claims have resumed their "normal" behavior in two respects. First, the effects of Hurricane Sandy are now fully out of the numbers, as we show in the first chart. Second, claims are generally trending lower as we would expect them to through the end of February. This will keep the wind at Financials' back, generally speaking, for the next two months. 

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 1

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 2

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 3

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 4

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 5

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 6

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 7

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 8
 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 9

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 10

 

JOSHUA STEINER: JOBLESS CLAIMS: TOO MUCH DATA MISSING TO DRAW ANY CONCLUSIONS - 11 

 

Joshua Steiner, CFA

 

Robert Belsky

Rb


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