Below are the economic and market highlights for the week:
- The U.S. economy continued to boom in November. The S&P Services sector index rose to a 32-month high of 57. Numbers above 50 indicate expansion while numbers below signal contraction. Meanwhile, the S&P Manufacturing PMI remained in negative territory coming in at 48. The outlook for future expansion remains strong with survey respondents noting optimism over additional interest rate cuts and a pro-business administration in the White House.
- Home sales surged 3.40% in October to a seasonally adjusted annualized rate of 3.96 million units. Sales volumes were 2.90% higher than a year ago, marking the first increase in more than three years. Supply also jumped, increasing 19.10% YOY to 1.37 million units. That’s equivalent to a 4.2-month supply at the current sales pace, inching closer to the six to seven months supply considered to be a healthy balance between supply and demand. Despite the rise in inventory, the median price of a home continued to move higher, increasing 4% from a year ago to $407,200.
- New home construction fell 3.10% in October to a seasonally adjusted annual rate of 1.3 million, a three-month low. YOY, new home construction was down 4%. The drop was driven by a decline in single-family construction which more than offset an increase in apartment building. Building permits, a sign of future construction, slipped 0.60% as a rise in single-family failed to offset a drop in apartment building.
Trump Trade Rebounds
The Trump trade came roaring back this week, sending the Dow Jones Industrial Average up more than 450 points on Thursday and another 426 on Friday. Thursday was the Dow’s best session since the Wednesday following the U.S. election. A rotation from tech stocks into a larger array of sectors helped push the industrial index broadly higher. Sentiment rebounded sharply from last week as the new administration’s cabinet has now begun to take shape, promising to shake up business as usual in Washington. In particular, the newly created Department of Government Efficiency (DOGE) had investors feeling optimistic over the prospects that government spending will be slashed, regulations will be relaxed, and the government workforce will be culled through a combination of attrition and greater automation. Markets expect those moves to boost U.S. economic growth above the solid pace that it is already trending. On the economic front, the services sector and existing home sales were strong, offsetting weak manufacturing and homebuilding prints.
While all the major indices finished higher this week, it was small cap stocks that led the charge, rising 4.46% on hopes of a “made in America” policy agenda. While the stock market has benefited from the prospect of stronger growth, the bond market has been more skeptical over what that growth may actually mean for rates. The 10-year U.S. treasury yield hit 4.4% on Thursday, resulting in the 2 YR and 10 YR treasuries trading within a 0.8% yield difference to one another. Increasingly, the short end of the curve is being influenced by expectations over what the Fed will do in 2025, while the long end continues to reflect a degree of cautiousness on the part of investors over the longer-term implications faced from accelerating growth, stubborn inflation and ballooning Federal debt.
The Week Ahead
Grab a turkey leg and pass the mashed potatoes. The Thanksgiving holiday is upon us. Flush with cash from the year’s gains, traders are primed to head out early for the holiday. Week in Review will also take a pause for the holiday. Our next edition arrives on December 6th with the latest nonfarm payrolls, manufacturing, and services numbers.
It’s Bananas
The art world has gone bananas over a banana. At an auction earlier this week, a single piece of art that seems to belong inside of a grocery store rather than in a prestigious auction house or gallery sold for $6.24 million. The piece of art in question is a banana duct-taped to a white wall. It is titled Comedian and was created by Italian artist Maurizio Cattelan in 2019. While Cattelan’s fruit itself is perishable (and edible), the idea that something as simple as a banana can be worth millions has ignited debate about the value society is willing to place on an everyday, mundane object simply because an artist calls it art.
The first installation of Comedian appeared at Art Basel Miami Beach in 2019, an international, private art fair showcasing work by more than 4,000 artists in three host locations, Basel, Switzerland, Hong Kong, China, and Miami Beach, FL. Three bananas sold at Art Basel five years ago for between $120,000 and $150,000 per piece. Sotheby’s in New York estimated ahead of this week’s auction that its banana would sell for at least $1 million. It described the artwork as “Passionately debated, rhapsodically venerated, and hotly contested.” Art enthusiasts argued whether the banana was truly art or a prank or whether it was a symbol of the excess of the art market or the absurdity of modern art. During the sale, auctioneer Oliver Barker described the work as “iconic” and “disruptive” while joking that selling a banana at an art auction were “words I’d never thought I’d say.” With all the intrigue, seven bidders were biting and chased the price up in a fruit frenzy.
The worlds’ most expensive banana sold on Wednesday to Chinese collector Justin Sun, founder of cryptocurrency platform Tron. Sun intends to pay for the piece in crypto, and he has also shared his plans for the art: to eat it and honor the banana’s place in both art history and popular culture.
Cattelan said he came up with the idea of taping a banana to a wall after becoming weary of seeing a surplus of large, bold canvases at art shows, and he thought a simple banana would break through the noise. Once he saw the crowds drawn to his piece of art, he tried to buy back one of the bananas at four times the original price. Cattelan was out of luck because they had already sold.
Comedian is a conceptual artwork, and the physical materials are replaced with every installation. When a person buys Cattelan’s Comedian, it is not the banana itself, but a certificate of authenticity that grants the owner the permission and authority to reproduce the banana and duct tape on their wall as an original artwork by Maurizio Cattelan. According to an article in the Wall Street Journal, to maintain the banana artwork, the work’s owner receives a 14-page sheet of instructions. The instruction manual advises the owner to continually refresh the installation by buying their own supply of new bananas and tape. Although one article said Sun will receive a roll of duct tape with his latest acquisition. One requirement for Comedian is that the banana’s curve should point right, not left. The fruit should also be displayed vertically, not horizontally, and it should be placed roughly at eye level. If you see a banana taped to a wall that looks like a smiley face, you will know it’s a knock off.