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Nice Relief Rally on Biotech Assurances, Home Sales Data

Three out of the four major stock market indexes closed higher Monday — a quick relief rally filling in gaps from Friday’s 2%+ sell-off. The Dow crossed back north of 35K, +236 points or +0.68%. The S&P 500 put up its best trading day in six weeks, +1.32%, while the Nasdaq won the day, +1.88% or +291 points. Only the small-cap Russell 2000 was down slightly, -0.18%.

With assurances from Moderna MRNA that the new Omicron variant of Covid-19 would be met with a vaccine early next year, this sent shares of the Cambridge, MA biotech up nearly +12% on the day. (On the flip side, Novavax NVAX lost -11% Monday on a vaccine setback reported in India today.) But the Moderna news provided a nice backstop for investors not only concerned about the highly contagious Omicron variant, but unsure how widespread the economic damage might reach, as of last Friday.

Pending Home Sales for October were released this morning after the opening bell, with a big surprise to the upside: +7.5% was well ahead of the +0.7% analysts were expecting, and nearly +10% from the previous month’s -2.4%. This, even as the average rate on a 30-year fixed mortgage rose from sub-3% to 3.22% by late October. Overall, sales were -1.4% off the pace of the same month a year ago, but pre-closed housing sales looks alive and well in late 2021.

In fact, 2021 is shaping up to be the best year in U.S. home sales since 2005, at 6+ million. As we’ve seen in other housing data of late, the Midwest was the hottest region, +11.8% month over month, followed by the South at +8.0% and the Northeast at +6.9%. The West — generally the hottest housing market over the last couple years — was still positive last month, +2.1% month over month.

One development we see in pending home sales of late is a real lack of supply, now sitting at 2.4 months. Total housing inventory among already-owned houses has dropped -12% year over year; it would seem part of what’s affecting things in this space is the lack of interest in selling among current homeowners. We also are approaching winter months, where seasonal drawbacks in the Midwest and Northeast cool homebuying until the spring.

Tomorrow morning brings us Case-Shiller Home Price Index data for the month of September. Home prices have shifted into a higher gear since the Covid-19 pandemic took hold in March of 2020, and the last month reported showed a healthy +19.7% growth month over month. We’ve not seen one down month in this long cycle, although September did represent softness in many other economic metrics already reported.

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