New Home Sales, Lululemon Earnings, Feb. PCE: What to Watch

The market is buzzing with a trio of key indicators this week: new home sales, Lululemon's earnings, and the February PCE report. Let's dive into what these metrics mean for investors and the broader economy.

New Home Sales: A Mixed Bag

New home sales in the United States have been on a rollercoaster ride, influenced by mortgage rates and broader economic factors. In December 2024, sales rose by 3.6% to a seasonally adjusted annualized rate of 698,000, despite a surge in benchmark mortgage rates. This increase was driven by strong demand in the West and Northeast regions, while the South and Midwest saw slight declines.

However, the picture isn't entirely rosy. In October 2024, sales plummeted by 17.3% to 610,000, marking the sharpest decline since 2013. This drop was largely due to affordability challenges and the impact of hurricanes in the South. The median price for homes in December was $427,000, indicating that buyers are still active despite higher borrowing costs.

Lululemon Earnings: A Bullish Story

Lululemon's third-quarter earnings report painted a bullish picture for the athletic wear retailer. Net revenue increased by 9% to $2.4 billion, driven by a 33% surge in international net revenue. Comparable sales also rose by 4%, with international markets contributing significantly to this growth.



The company's international expansion, particularly in Greater China, has been a standout performer. Revenue from Greater China increased by 53%, contributing to a 49% growth in international markets. This global reach is a key indicator of Lululemon's long-term growth potential.

February PCE: Inflation in Focus

The Personal Consumption Expenditures (PCE) Price Index, released on February 28, 2025, will provide crucial insights into inflation trends. The PCE index, which reflects changes in the prices of goods and services purchased by consumers, has shown a steady increase over the past year. In December 2024, the index rose by 2.8% year-over-year, up from 2.6% in November.



The core PCE price index, which excludes food and energy, is closely watched by the Federal Reserve as it conducts monetary policy. In December 2024, the core PCE index also rose by 2.8%, indicating underlying inflationary pressures.

What to Watch

1. New Home Sales: Keep an eye on mortgage rates and regional dynamics. A sustained increase in sales could signal a robust housing market, benefiting construction and finance sectors. However, affordability challenges and economic uncertainty could dampen demand.

2. Lululemon Earnings: Lululemon's strong revenue growth and international expansion are positive signs. Investors should monitor the company's inventory management and gross margins, as these metrics indicate operational efficiency and profitability.

3. February PCE: The PCE report will provide insights into inflation trends and the Fed's potential policy moves. A higher-than-expected PCE index could signal further rate hikes, impacting sectors sensitive to interest rates.

In conclusion, the market is at a critical juncture with new home sales, Lululemon earnings, and the February PCE report all providing valuable insights. Investors should stay vigilant and adapt their strategies based on these key indicators.