The Day Ahead: All Attention on Housing
After a sharply lower open yesterday, stocks edged forward in the first hour and continued a steady climb throughout the day to end roughly 0.50% higher. Meantime, yields on Treasuries actually fell, with the 5-year bill ending the day 5 basis points lower at 2.40% and the 10 year note ending the day 3 basis points lower at 3.66%.
On Tuesday morning ahead of key housing data, markets are mixed but mostly sideways near yesterday's closing marks.
“So much for the doomsday scenario if health care reform was passed, as U.S. stocks, bonds and the dollar all rose yesterday ― the Dow extending a streak of nine gains in ten days,” noted BMO economist Jennifer Lee in an early note.
At 8:20am, Dow futures are up 2 points at 10,727 while S&P 500 futures are down 0.25 points to 1162. Both are slightly off their early morning high prints.
NYMEX crude oil futures are cheaper, trading 47 cents lower to $81.60 per barrel while Gold is down $3.30 to $1,096.
Meantime, the US dollar index is up 0.295 to 80.94.
According to Reuters, Treasury Secretary Tim Geithner will today call for a new mortgage finance system. In an address to the House Financial Services Committee reads, Geithner will ask for the system to be revamped with more clearly defined government guarantees.
“Private gains can no longer be supported by the umbrella of public protection, capital standards must be higher and excessive risk-taking must be appropriately restrained," his written testimony says.
Geithner also also “the governance structure of the GSEs” ― Fannie Mae and Freddie Mac ― “a mistake” because of the “unhealthy combination” of implicit government support and private ownership. READ MORE FROM THE VOICE OF HOUSING
Other Key Events Today:
10:00 ― Existing Home Sales unexpectedly fell 7.2% to an annualized pace of 5.05 million sales in January, subtracting from the record 16.2% plunge in December. The double-hit pushed sales to a seven-month low, and with the tax incentive expiring in April things will likely be getting worse. The expectation from economists is that February sales will fall to 5.00 million, reflecting broad weakness as well as poor weather.
“January’s decline in pending home sales, coupled with the severe winter weather in some regions, point to slower sales,” said economists from BBVA. “In the recent winter months, sales have waned after surging prior to the anticipated expiration of the tax credit for first time buyers. However, favorable mortgage rates and low prices are expected to continue to attract buyers to the market.”
BMO’s Lee added that, “So far, the extension of the homebuyer tax credit to repeat buyers (which expires in April) has done little to prevent sales from almost fully retracing last year’s runup. Consequently, prices are starting to soften, with the FHFA house price index recording its second largest decline ever (-1.6%) in January.”
Taking a broader view, Ellen Zentner from BTMU wonders if more fundamental changes to the housing industry have already taken place.
“The housing market has hit a pot hole at the start of 2010, most likely the combined result of waning government stimulus and unusually poor weather in the first two months of the year,” she wrote in a weekly note. “Both of these unfavorable conditions are the kinds that reverse themselves in subsequent months, which means after the early-year hiccup the housing market recovery will resume.”
“But if these factors are masking some deeper underlying problem, such as a more permanent change in the way Americans view home buying, then not only would baseline forecasts need to be adjusted downward for slower housing activity, but for overall consumption as well since home buying is a significant driver of spending.”
3:00 ― Janet Yellen, president of the San Francisco Fed, speaks on the economic outlook and central bank independence to Town Hall Los Angeles.
Treasury Auctions:
- 11:30 ― 3-Month Bills
- 1:00 ― 2-Year Notes