We will have a special cheat-sheet on Alibaba’s (BABA) historic IPO soon – stay tuned!

After having digested the Federal Reserve’s comments overnight, the equity markets are on a tear today – all three are up roughly 0.5%, plus the Dow and the S&P managed to reach new all-time intraday highs. The repeated assurance of easy monetary policy is not only driving the stock market higher, but currency as well. Yellen’s dovish comments yesterday afternoon actually sent the value of the US dollar soaring to a new six-year high. Elsewhere in the world, the polls are open in Scotland as the country is voting in the independence referendum, the results of which will be released in the early morning hours tomorrow. Alibaba’s (BABA) shares will begin trading for the first time tomorrow and later today we will know what the official IPO price will be. We will have a separate report on the Alibaba IPO later today. It’s another day loaded with economic activity and here are the major elements driving the market…

Housing Starts & Permits

Firstly, homebuilders are being cautious as both the number of starts and permits disappointed for the month of August, but it was hard to keep up the impressive pace set the month before. Housing starts declined 14.4%, after a boost of 22.9% in July. August's pace of 0.956 million units was far short of market expectations for 1.038 million units, but was up 8.0% percent over last year. The multifamily component declined a monthly 31.7% following a 44.9% jump last month, but more importantly, the single-family component didn’t get much worse: only edged down 2.4% after the 11.1% surge in July. Building permits also oscillated a bit, declining by 5.6% in August after an 8.6% increase in July. For permits, the swing has primarily been due to the monthly changes in the multifamily component; the single-family component has been in decline for some time. This monthly figure tells us that analysts may revise Q3 GDP estimates lower, and that the strength is apparent in the multifamily sector, however we would rather see the single-family sector come back stronger.

Initial & Continuing Jobless Claims

Following the pop last week, initial claims declined during a week without any major economic factors or holidays. Initial claims fell by a sharp 36,000 to a much lower-then-expected level of 280,000. This is the same week as the government’s sample period for the September employment report, which should mean good news if the decline is accurate. We note that this is the second lowest level since the recovery began. The 4-week average is down 4,750 to 299,500 - which is also among the lowest levels of the recovery – and is down 1,500 from the 4-week average in the August sample week. Continuing claims are also moving lower, in lagging data for the September 6^th week. The level fell by 63,000 to a new recovery low of 2.429 million. Given the sudden strength in improvement, we aren’t sure what to make of these numbers – is the improvement a new trend or simply an outlier? More employment data will be needed going forward.

Philadelphia Fed Survey

Lastly, the Philly Fed’s current activity index for September gave a reading of 22.5, which was lower than the 28.0 reading in August, but strong nonetheless. The details of the report actually show more strength than August, so the composite reading does not make much sense. Shipments are accelerating further this month, to 21.6 from August's 16.5, and the all-important new orders came in at 15.5 compared to 14.7 in August. Perhaps the most surprising number of the report was in employment, which came in at a whopping reading of 21.2 after a reading of 9.2 in August. We note that the headline reading for the Philly report is not a composite of the components but rather a subjective observation on general business activity during the month. In the industrial production report from Monday, the manufacturing component was down 0.4% in August, but Fed readings in the Mid-Atlantic region suggest that growth in this sector is still quite strong.