Homebuyers "Coming Off the Sidelines," Fed's Tone & CapEx Key in Mag 7 Earnings

Housing Market Insights - Pending home sales remained flat at 0% for the month, contrary to market expectations of a 1.6% increase, although the previous month's figure was revised up from 4% to 4.2% [2][3] - Mortgage rates have been decreasing, yet there is a notable increase in contract cancellations, reaching the highest level since 2008, which may be reflected in the current pending home sales [3] - Refinance activity has surged, with a week-over-week increase of 9% and a year-over-year increase of 111%, indicating that lower rates are encouraging homeowners to access equity [5] Mortgage Applications - Total mortgage applications increased by 7.1% week-over-week, with purchase applications rising by 5%, marking a 20% increase year-over-year [5] - The refinancing trend is currently leading the market, but there is potential for first-time home buyers to enter as supply increases and rates continue to decline [6] Federal Reserve and Interest Rates - The market anticipates a 25 basis point rate cut in the upcoming Federal Reserve meeting, with another expected in December [8][9] - Concerns exist regarding the rising unemployment rate and persistent inflation, which may influence the Fed's decisions on rate cuts and quantitative tightening [10] Treasury and Mortgage-Backed Securities - The Fed is currently running off approximately $5 billion in Treasuries monthly, which is a small fraction of typical auction sizes, but is rolling off $30 billion in mortgage-backed securities, which could impact rates if the policy changes [11][12] Earnings Expectations - Major companies like Meta, Microsoft, and Alphabet are expected to report significant capital expenditure increases, with a focus on how they will monetize artificial intelligence projects [15][17] - Meta's ability to generate cash flow and its future spending plans are seen as potential risks, while Alphabet is viewed as well-positioned in the current market environment [17][19]