Updated home price data from S&P CoreLogic Case Shiller was published this morning through the month of November 2024.  Below is a summary table of key results across the 20 cities/regions tracked by Case Shiller.

Most cities saw home prices decline month-over-month from October to November, with San Francisco and Seattle down the most at roughly -0.75%.  Boston, Miami, and New York were the only cities that saw meaningful gains month-over-month.

Over the prior year, 19 of 20 cities were up, with Tampa the only city down at -0.37%.

New York ranks first when it comes to year-over-year price gains at +7.32%.

After a major jump in home prices in the immediate aftermath of the pandemic, we saw a small dip in 2022 and 2023 when risk assets sold off hard.  Since early 2023 lows, New York is also the city that has seen home prices jump the most at +16.76%.

Additionally, New York is now the only city where home prices are currently at all-time highs.  On the flip side, San Francisco, Seattle, and Denver are all down more than 5% from all-time highs.

Below is a historical look at Case Shiller home prices for the 20 cities tracked along with the composite indices.  We’ve highlighted New York in green because it’s the only city where prices are at all-time highs.

In listening to discussions over the market’s reaction to the DeepSeek sell-off yesterday, the term “shoot first, ask questions later” came up repeatedly. However, in looking at the performance of various indices and individual stocks yesterday, the market’s behavior looked more discerning than indiscriminate. At the individual stock level, most stocks in the S&P 500 finished the day higher, and the weakness was concentrated to stocks that have benefitted the most from the AI rally.

The chart below shows yesterday’s performance of major US index ETFs. As you would expect, the Nasdaq 100 with its concentration in technology was the hardest hit, falling by close to 3%. The cap-weighted S&P 500 (SPY) also declined more than 1% given its large weighting in Nvidia (NVDA) and other tech companies. The equal-weight index (RSP), however, finished the day in positive territory with a modest gain.  The one index where performance was not as we expected was in small caps where the Russell 2000 (IWM) also fell nearly 1%. On a day when mega-cap tech was crushed but the majority of large-cap stocks rallied and interest rates declined, we would have expected small caps to show more strength. Given the entire Russell 2000 is smaller than NVDA, it doesn’t take much to get this area of the market to rally.  Also, if DeepSeek means that the previous costs associated with adopting AI are now dramatically lower, shouldn’t that be good for small caps which presumably have smaller budgets?

Looking at the performance of these major index ETFs over the last week, outside of QQQ, they’re all still positive, even after Monday’s decline. Additionally, they’re also all trading right within the confines of their normal trading ranges (none are oversold or overbought) which is a level of homogeneity that it feels like we don’t see much these days.

The Russell 2000’s lack of a rally came within the context of a week-long period where IWM has been unsuccessfully attempting to break back above its 50-DMA. Yesterday marked the fifth straight day where it tested that level but failed to close above it.

The mid-cap ETF (MDY) finished well off its intraday high yesterday and also traded below its 50-DMA but managed to close the day just barely above that level.

The 50-DMA also acted as support for the S&P 500. After opening right at that level in the morning, the large-cap benchmark bounced throughout the session and finished at the highs of the session.

The chart of the Equal Weight S&P 500 (RSP) over the last few days looks similar to small caps with a tight range. The only difference is that, unlike IWM, RSP has closed above its 50-DMA for each of the last four trading days.

Finally, the Nasdaq 100 (QQQ) was the biggest pain point of the major indices. It started the session below its 50-DMA and made an attempt to rally back above that level intraday but came up just short by the time the closing bell rang. While QQQ failed to take out its December high in last week’s rally, it did manage a higher high, and as long as yesterday’s decline doesn’t see much in the way of follow-through, it isn’t in imminent danger of a lower low in the short-term.

The Nasdaq is down well over 3% as of this writing with AI hardware names driving the declines. The main AI infrastructure stock — NVIDIA (NVDA) — is down roughly 20% over the last two trading days, which equates to a drop of nearly $700 billion in market cap!  Amazingly, news that DeepSeek out of China had built a ChatGPT-like product for a fraction of the cost was actually circulating weeks ago at the end of last year. It wasn’t until this weekend, though, that the ramifications of this news started being debated heavily on social media platforms like X.

Our AI Basket is a set of 50 stocks with exposure to the AI Boom. The headline basket is further broken down into two sub-baskets: the Infrastructure basket and the Implementation basket. The former is comprised of stocks whose hardware and software lay the foundation for AI to work. These include companies that make semiconductors, data centers, cloud storage, and more. The Implementation basket, on the other hand, is made up of companies whose products are more oriented towards end-users of AI.  This includes stocks with products like AI augmented software, copilots, automated services and the like.

Although AI stocks are down broadly today, it is the Infrastructure basket that has been hit the hardest. With DeepSeek’s supposed low-cost to build its latest ChatGPT-like offering, it has brought into question the necessity for massive capex spend on chips and datacenters, and our AI Infrastructure sub-basket is down an incredible 8.2% on the day as a result! That compares to only a 1.5% decline in our Implementation sub-basket. As shown below, since the start of our AI Baskets a little over two years ago, this is easily the worst day for our Infrastructure basket relative to our Implementation basket to date, and it isn’t even close. In tonight’s Closer, we will provide a further look into the performance of the AI baskets in the wake of the DeepSeek discussion.