Market Update
by Tom on July 24, 2008
in Market Musings
I just got this in from our Investment Advisors. Thought you might find it useful….
If I can help, call or e-mail me.
Tom
Selling in stocks today, with offset buying in Bonds. Commodity markets are flat to lower. Concern of the day is a very weak US Existing Home Sales report (see below) that started the selling in stocks right after it came out at 10am eastern.
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The major stock indexes are down in the 1-2% range on the day – with the NASDAQ Composite holding its value the best, while the Emerging Market ETF is seeing the most selling. Only one sector – Healthcare – currently higher on the day – with Financials leading to the downside.
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Bonds in general are seeing buying on the day, with Treasury, Corporate and International bond ETF’s all seeing gains. Treasury yields are sharply lower at the short-end of the yield curve (see above).
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Commodity prices are generally flat to down. Only 5 of the 19 CRB components are higher – with natural gas seeing a 7% decline on the day as a weekly inventory report today showed a strong build.
Economic Reports
1) Existing-home sales declined in June by 2.6% MoM, according to the National Association of Realtors. Sales declined to 4.86 million annualized units (…which is now just below the six-month average of 4.93 million pace). Inventories are rising again, with 11.1 months of supply on the market (…versus the 10.5 month six-month average). The median existing-home price is declining, with a YoY drop of 6.2%, but not as severely as earlier this year.
2) Initial jobless claims for the week ending July 19 increased to 406,000 from a revised 372,000 (previously 366,000). The four-week moving average for initial jobless claims increased to 382,500, compared with the prior week’s 378,000. Continuing claims for the week ending July 12 fell 9,000 to 3.107 million from a revised 3.116 million (previously 3.122 million). Initial claims now are at their highest since the end of March.
Comment
Markets are giving back some recent gains today as the economic data (…housing) continues to be negative and is trumping the mostly better-than-expected earnings reports.
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So far, 237 of the S&P 500 companies have reported quarterly earnings with 73% producing positive surprises (…historically this is around 64%) and five sectors are, so far, reporting double-digit YoY gains – Consumer Discretionary, Consumer Staples, Energy, Healthcare and Tech. However, the 96% YoY decline in the Financial sector swamps all…
We now need better news in at least two of the below three areas to help support the recent Financial-led rebound in stocks –
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lower crude oil (…happening)
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better US housing market news (…not happening)
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calmer credit market (…not happening – credit spreads widening again with and continued concern about US loan losses).
The housing news was weak today and we get another housing number, for new home sales, tomorrow.
Good news recently – Wholesale Gasoline has fallen from a high of $3.57/gallon on July 3rd to $3.03/gallon today…
Continued daily trade-offs, reversals and rebounds in capital & commodity markets – as the picture of a US recession vs. a global slowdown vs. global inflation changes view from day-to-day.
