Weekly Market Update: Housing Hits New Lows as Leadership Shifts Beneath the Surface
Markets traded lower this week, although performance beneath the major indexes was stronger. The S&P 500 fell -1.1% and the Nasdaq declined -3.4%, while the Russell 2000 small-cap index gained 0.3%.
The Equal-Weight S&P 500 rose 1.2%, highlighting broad participation despite tech weakness, and Value 0.9% outperformed Growth -3.6%. Eight of eleven sectors traded higher, led by Consumer Staples 3.5%, Utilities 2.7%, and Financials 2.4%. Technology -3.9% and Communication Services -4.8% lagged.
Bonds rallied as Treasury yields declined, with long-maturity Treasuries gaining 2.3% compared with 0.3% for short-maturity bonds. Investment-grade corporate bonds rose 0.8%, while high-yield bonds were flat. Oil rose 2.8%, the U.S. dollar weakened modestly, and the VIX ended flat after a late-week spike.
Key Takeaways
High Mortgage Rates Push Housing to New Lows
Pending home sales, which measure contracts to purchase existing homes, fell -7.3% in September, leaving the index at its lowest level since tracking began in 2001. Housing starts declined -5.2% to an annualized rate of 1.22 million units, the second weakest reading since the pandemic.
Homebuilder confidence fell to 29 in October, its lowest level since 2012 and well below the neutral level of 50. The weakness is tied to the average 30-year fixed mortgage rate sitting above 7%, among the highest levels since the early 2000s. High borrowing costs and persistent affordability challenges have discouraged buyers. Meanwhile, elevated construction costs have weighed on builders, leading them to cut prices and offer incentives.
Why it matters: The breadth and severity of the latest declines underscore how much housing has weakened relative to other areas of the U.S. economy.
Industrial Output Rises, Led by Utilities and Tech
Headline industrial production rose 0.7% in September, helped by a 3.5% increase in utility output as unseasonably high temperatures lifted demand for electricity and natural gas. Manufacturing output rose a more modest 0.3%.
Over the full third quarter, semiconductor and electronic-component production grew at a 28.4% annualized rate, which helped support factory activity. However, manufacturing output excluding selected high-technology industries was nearly flat, rising at just a 0.1% annualized rate.
Why it matters: Technology-related manufacturing continues to support industrial growth, while activity across the broader manufacturing sector remains more modest.
Trade Prices Point to Broader Inflation
Prices for goods imported into the U.S. rose 1.1% in September and 8.1% over the past year. Higher fuel prices contributed, but import prices excluding fuel still rose 0.7%.
Prices received by U.S. exporters increased 2.2% for the month and 11.6% over the past year. These figures reflect prices paid and received in international trade, not prices charged directly to consumers.
Why it matters: The report adds a business-level view to last week’s consumer and producer inflation data, and it’s further evidence of how broad September’s price increases were.
S&P 500 Holds Near Records as Leadership Shifts
Large technology companies, particularly those tied to artificial intelligence and semiconductors, have seen sharp swings in recent weeks.
However, other sectors, including some that had previously lagged the broader market, have partly offset that weakness.
Why it matters: Recent volatility has largely reflected a change in leadership rather than a broad-based retreat from stocks.
