Mid-Day Recap: Stocks Shrug Off Housing Data, Dip Into Red
Three economic reports this morning have confirmed that there are signs of stabilization in the US economy, but markets are having none of it. Equities were unchanged following a big advance in new orders for durable goods, and a jump in new home sales only put stocks in the black temporarily.
Three hours into the mid-week session, all three indexes had fallen from their modest gains. The Nasdaq was down 0.32% to 2,017, the S&P 500 was 0.13% lower at 1,026, and the Dow was down 0.01% to 9,539.
Globally, markets were mixed too. In Asia, China’s Shanghai index rallied 1.78% and Japan’s Nikkei moved up 1.36%, but in Europe results were less encouraging. London’s FTSE 100 drew back 0.54%, the German DAX fell 0.41%, and France's CAC-40 shed 0.31%.
As with every Wednesday, the day began early with a 7am Mortgage Applications report. The industry survey found refinance activity increase to its highest level since early June with a 12.7% gain ― the third advance in the past four weeks ― which helped the volume of mortgage applications to advance 7.6%, building on the 5.6% gain in the week before.
More positive data hit markets when new orders for durable surged 4.9% in the month, easily erasing the 1.3% decline in June and beating the market consensus for a 3% gain. The fastest increase in two years was due in large part to aircraft orders from Boeing rather than a broad advance, which tempered market reaction.
The Cash for Clunkers program has no visible impact on orders for new cars, but the wildly successful program should help the headline index see another positive print in August.
“Though July durable goods orders were boosted by the volatile aircraft series, the momentum in orders has clearly improved with every major category (apart from motor vehicles) posting an increase on a three-month basis,” noted analysts at RDQ. Looking into the Fall they look for gains in business equipment spending as companies restock from massive liquidation earlier in the year.
Markets mostly shrugged off the report. Real estate data at 10:00 had markets rebound initially, but gains were pared within the hour.
New Home Sales shot up 9.6% in July, following a 9.1% increase in June, providing another confirmation that economic growth should resume in the third quarter.
“Sales were up, inventories down, and data revisions boosted the sales numbers for April, May, and June,” said Patrick Newport from IHS Global Insight.
Excess overhang was slashed to 7.5 months, down one month from June and showing a rapid decline in inventory from the peak of 12.1 months at the start of the year.
“The report's one blemish is that the median time it took to sell a new home jumped to a record high 12.4 months,” Newport noted. “From a builder's perspective, the market for selling new homes is still brutal, despite the recent pickup in demand.”
No more macroeconomic data is scheduled for the day, but at 1pm the Treasury holds an auction for 5-year notes. Just before Noon, the 5-year yield is trading at 2.44%, one-tenth lower on the day.