Home Sales and Consumer Confidence Get Year-End Boosts, but Jobless Claims on Upswing

U.S. existing home sales rose in November for the second month in a row and consumer confidence reached an eight-month high in December, suggesting the U.S. economy might be bouncing back from two quarters of slowing growth. Business activity also grew in the Midwest in what might be the beginning of a rebound in the manufacturing sector. Bond prices fell on the reports, which were stronger than expected, since the odds are now slimmer that the Fed will cut interest rates early in 2007. The National Association of Realtors said existing home sales rose 0.6% in November, while the Conference Board said its index of consumer sentiment reached 109.0 in December, the highest since April. The number of homes on the market dropped 1%, although median home prices are still down 3.1% from a year ago. Though the news is mixed, the home sales report suggests the sector might have bottomed. Meanwhile, U.S. initial jobless claims rose slightly last week, and the number of people collecting unemployment benefits rose to the highest level since January. Slower employment growth is likely to dent consumer spending and to place a drag on an economy already encumbered by the weak housing market.

• Sources: Bloomberg (I, II), Forbes, Reuters
• Related commentary: U.S. Economy Just Beginning to Sizzle -- Barron's, How Long Can Consumer Confidence, Earnings Weather the Housing Bust?, It's Still The Economy, Stupid, Paul Kasriel On the State of Consumer Debt and Savings
• Potentially impacted ETFs: S&P 500 Index (SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (DIA), iShares Russell 2000 Index ETF (IWM), iShares Lehman 1-3 Year Treasury Bond ETF (SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (IEF), iShares Lehman 20+ Year Treasury Bond ETF (TLT)

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