Stocks ended this short week with a sharp drop on concerns about a new coronavirus variant. Friday's drop came in a holiday-shortened session typically characterized by light volume, so it is difficult to tell if the market's reaction would have as severe in a normal session.
The S&P 500 had gained 0.11% prior to exchanges closing for Thursday in observance of Thanksgiving. Despite the short week plenty of economic data was released with most surpassing economists estimates. Meanwhile, more companies reported quarterly earnings including big names such as Best Buy (BBY), Dell (DELL), HP (HPQ), Gap (GPS), and others.
Prices Rising Faster Than Income
PCE data for October data in above estimates with personal income and spending rising 0.5% and 1.3% respectively as economists expected only a 0.2% and 1.0% gain. However, real disposable personal income fell 0.9% year-over-year as prices increased at a faster rate than income.
PCE prices meanwhile met analysts expectations for a 0.6% rise and 0.4% increase in core PCE prices. Prices rose faster in October as September saw prices increase 0.4% with core prices rising 0.2%. Core prices have now risen 4.1% year-over-year, up from 3.7% reported in September and 3.6% the previous three months.
Other Economic Data
Initial unemployment claims fell far below what economists were expecting as claims dropped to 199,000 from 268,000 the previous week. Estimates were for a far smaller drop to 265,000 claims. The report marks the first time initial claims have dropped below 200,000 since before the pandemic and is less than the average from before COVID-19. A little more than 200,000 was typical early in 2020 and will be crucial to see if claims are able to stay around that number going forward or if they will jump back up next week.
Home sales were mixed in October as existing sales rose from 6.29 million to 6.34 million, surpassing estimates for a drop to 6.19 million. However, new home sales fell to 745,000 while analysts expected 800,000 sales. To make matters worse, September numbers were revised from 800,000 down to 742,000.
Lastly, Durable Orders dropped again in October, falling 0.5% after it lost 0.4% in September. Economists were expecting a small 0.2% rise. The biggest losers in October were capital goods which fell 4.0% and a 2.6% drop in transportation.
All in all, the S&P 500 lost 2.2%, the Dow Jones Industrial Average fell 1.97%, and the NASDAQ dropped 3.52%.
