Household Formation, Government Relief on Deck?

Tuesday, September 22, 2020

Pre-market activity is finding its equilibrium after a temporary horror show in Monday’s regular session which saw all major indexes plummet, including the Dow falling almost 1000 points, or 3%. The closing bell saw lots of buying off those steep lows, with the Nasdaq almost crossing into the green. Currently, we’re looking at markets hovering around flat.

We won’t be seeing any meaningful economic data before regular Tuesday trading starts, but afterwards we do: Existing Home Sales for August being one of them. In July, a headline number of 5.86 million units sold was the highest in a decade, feeding pent-up demand that hurt the market as the pandemic extended through the summer months. For August, expectations are for 6.03 existing homes to have been sold.

This would continue the narrative that household formation is providing an undercurrent of strength in the overall economy, as pent-up demand continues to find its way into the market. Young adults in rented apartments make their way to starter condos and smaller single-family homes, which pushes those currently in the units toward single-family homes or larger homes in desirable neighborhoods (lately, post-initial Covid spread, this means Americans moving out of crowded cities to the suburbs and exurbs).

Though the current reads are still well off the 2006 peak, when 7.25 million existing homes sold in a month, this is still a healthy sign for the economy. Home improvements, contracting jobs, furniture sales — all of it goes to spur the underlying businesses, including many small businesses, that provide products and services for household formation.

Speaking of spurring underlying businesses, the House Financial Services Committee today will hold a hearing whereby Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell will answer questions regarding needed relief going forward. Without a relief package to follow the CARES Act, which expired more than six weeks ago, will Mnuchin indicate the Trump administration is in favor of small business support, and/or an extension of unemployment benefits? Much is yet unclear on these subjects.

For Powell, the question is closer to: Can the Fed do more? After all, after announcing 0-0.25 interest rates for the next three years, $2.3 trillion in lending to households, and securities purchases now totaling more than $6 trillion, keeping credit markets in business by covering rates to primary dealers, backstopping liquidity in mutual market funds and expanding repo operations, what else is there?

Mark Vickery
Senior Editor

Questions or comments about this article and/or its author? Click here>>

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SPDR SP 500 ETF (SPY): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
To read this article on click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.