U.S. home resales rebounded strongly in September, and new applications for unemployment benefits hovered around 42-year lows last week, pointing at solid domestic fundamentals even as the global economy falters.
Upbeat housing and labor market reports released on Oct. 22 could keep the door open to an interest rate hike from the Federal Reserve by the end of the year.
"The market has been a little bit quick to price out a December Fed rate hike," said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York. "What you are seeing in the data is that the domestic picture looks strong, and I think that's what the Fed is going to be looking at closely."
The National Association of Realtors said existing home sales increased 4.7 percent to an annual rate of 5.55 million units in September, almost erasing August's decline.
A firming housing market is boosting household wealth, driving a robust pace of consumer spending. In turn, strong domestic demand is helping to cushion the blow on the economy from softening global growth, a strong dollar and weak capital spending in the energy sector.
Growth has also been squeezed by efforts by businesses to reduce an inventory bulge, leaving gross domestic product growth estimates for the third quarter running below a 1.5 percent annualized rate. The economy grew at a 3.9 percent rate in the second quarter.
Housing, however, remains constrained by a dearth of properties available for sale. But rising house prices could encourage homeowners to put their houses on the market.
The median price for a previously owned home rose 6.1 percent in September from a year ago. Realtors and economists say insufficient equity has contributed to the tight housing inventories.
The stock of houses on the market fell 2.6 percent in September from August. At September's sales pace, it would take 4.8 months to clear houses from the market, down from 5.1 months in August. A six-months supply is viewed as a healthy balance between supply and demand.
The housing index fell 0.43 percent, underperforming a broadly firmer stock market. Shares in D.R. Horton, the largest U.S. homebuilder, declined 1.59 percent. Lennar Corp slipped 0.90 percent.
The dollar rallied against the euro on the data and dovish comments from the European Central Bank. Prices for longer-dated U.S. government bonds fell.
FIRMING JOBS MARKET
In a separate report, the Labor Department said initial claims for state jobless benefits rose 3,000 to a seasonally adjusted 259,000 for the week ended Oct. 17.
Still, they remained not too far from levels last seen in late 1973, and it was the 33rd straight week that claims were below the 300,000 threshold, which is normally associated with a firming jobs market.
At current levels, there is not much scope for claims to fall further and the very low level of layoffs suggests the labor market remains in good shape, despite a recent abrupt slowdown in job growth.
"These data signal that companies remain extremely unwilling to let go of labor and that the number of short-term unemployed remains very low," said John Ryding, chief economist at RDQ Economics in New York.
The four-week moving average of claims, considered a better measure of labor market trends as it strips out week-to-week volatility, slipped 2,000 to 263,250 last week, the lowest level since December 1973.
The claims report covered the period during which the government surveyed employers for the payrolls portion of October's unemployment report. The four-week moving average of claims fell 9,250 between the September and October survey periods. That suggested a pick-up in job gains this month.
Nonfarm payroll gains in August and September averaged 139,000, the weakest two-month rise since January 2014. The claims report showed the number of people still receiving benefits after an initial week of aid rose 6,000 to 2.17 million in the week ended Oct. 10.
The four-week moving average of continuing claims was the lowest since late 2000, suggesting a further decline in the unemployment rate from 5.1 percent in September.
"With August and September being notorious for initially under-reporting job gains, today's data add to the case that employment growth will pick up in October and the unemployment rate will continue to grind lower," said Ryding.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)