The Market Today

Existing Home Sales Disappoint, Net Worth Hits New Record, Stocks Keep Running


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

The only economic reports on the calendar today include the preliminary September reports on manufacturing and service sector activity from Markit.  In yesterday’s report on 2Q Household Net Worth, net worth rose to a new record-high of $106.9 trillion as real estate assets jumped $320 bn and financial assets grew another $1.8 tn.  Overall debt levels remain low for households.  Along with record-high asset values the consumer remains in a very stable position.

 

TRADING ACTIVITY

Yesterday – A Pair of Records: The Dow rallied 0.95% Thursday to close at 26,657 in its first record-setting session since January 26. The S&P gained a smaller 0.78% but also finished at a new all-time high for the first since August 29. The Nasdaq climbed a stronger 0.98% but ended 1.0% shy of its current all-time peak. As evidence that investors were less concerned about a trade war, at least for the time being, shares of Caterpillar and Boeing were the biggest point contributors to the Dow’s gain. The improved sentiment, however, was far reaching as all nine sectors rose and four moving up more than 1%. Ten of the S&P 500’s 11 sectors ended positively, with tech leading all gains. Treasury yields also pushed strongly higher early, but receded throughout the day to end flatter but little changed. The 2-year yield finished 1.3 bps higher at 2.80% after climbing as much as 2.7 bps earlier in the day. The 10-year yield reached as high as 3.09% but fell back to end unchanged at 3.06%. The Dollar, however, didn’t reverse its early move lower, with the U.S. currency closing down 0.7% and at its lowest level in more than two months.

 

Overnight – Foreign Stocks Head into the Weekend on a High Note: With this week’s tariffs action one day further removed from the fore of their minds, global investors continued to push equities higher heading in to the weekend. Foreign indices have strengthened following a pair of records yesterday in the U.S. China’s CSI led all global gains, with the CSI 300 up a sharp 3.0% to its highest level since August 1. The index is up 5.2% from last Friday marking its strongest weekly performance since November 2015. As a central bank aside, the Bank of Japan’s 2%  inflation target was unthreatened by the August CPI report, which showed core inflation rose 0.9% YoY. In Europe, the risk tone remains firm ahead of U.S. trading. The national indices are holding healthy gains which have helped push the Stoxx Europe 600 up 0.4%. The broad index has risen in six consecutive session, the longest positive stretch since July. Composite PMIs in France and Germany fell short of estimates for September, driving the Eurozone-wide result down unexpectedly to its softest reading since May. Those reports also pulled European government bond yields quickly down from daily highs to lower on the day. U.S. Treasury yields were affected by the gravitational pull emanating from Europe, but remained higher just before 7 a.m. CT. The curve inside of 10 years was roughly 1.0 bps above Thursday’s closing levels; the 10-year was trading at 3.07%. U.S. equity futures were mixed but little changed.

 

NOTEWORTHY NEWS

Existing Homes Sales Miss Again: Existing home sales were flat in August, missing expectations for a fifth month in a row and holding at their slowest pace since February 2016. Sales in the South and West, which account for nearly two-thirds of total activity, fell 0.5% and 5.9%, respectively. The slowdown in the South was the sixth consecutive and took sales to their slowest pace since last October. The 5.9% pullback in the West was the sixth this year and the sharpest since November 2015, which also represented the last month with a weaker sales volume. Supply on hand was unchanged for a third time at 4.3 months and both the median and average price cooled for a second month, consistent with expected seasonal patterns. On a YoY basis, the median price was 4.6% higher, below its average 2017 pace of 6.0%. In a sign that demand remains steady, homes sat on the market for just 29 days in August, up from the 27 days in July but still below the 30 days it took to procure a contract in August 2017. With scarce inventories a big driver of the upward price pressure that has helped sideline potential buyers, the fact inventories grew YoY for the first time since May 2015 offered a hint of positivity for a sector saturated recently by gloomy data points.

 

ICYMI – September Bloomberg Survey of Economists: September’s Bloomberg survey of economists showed few changes to outlook compared with August. Click here to view the survey.

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