Friday, August 21, 2009

Existing Home Sales Gain Pushes Stocks Higher

Rising for the 4th day in a row, major US stock indices broke through resistance and above previous highs of a week ago, thanks to cheery news from the National Association of Realtors (NAR), who released their July existing homes sales data, showing the largest one month gain in the history of the series, dating back to 1999.

The 7.2% gain over June's figures was the 4th straight monthly gain for the measure. The NAR reported that distressed sales made up 31% of all sales and first time buyers were responsible for 30%. The 5.24 million units in July were well ahead of the 4.89 million in June, and are 5%t above the 4.99 million-unit pace in July 2008.

This is capitalism at work. The oversupply of homes on the market has lowered prices to a median of 178,000, though many of the distressed, foreclosed properties are going for well below that number. There are speculators, new buyers and even people upgrading within the context of historically-low interest rates and oversupply on the market forcing prices down.

Today's data was another in a lengthening string of positive economic reports and investors took action right upon the news. At 10:00 am, when the report was released, all of the major indices shot straight up, to near the closing levels. The Dow, which was already up 50 points at the open, immediately tacked on another 100, taking the average above 9500 for the first time since November 4, 2008, when the index closed at 9625.28.

The NASDAQ and S&P blew through their respective highs as well, with confidence in the US economy continuing to grow.

Dow 9,505.96, +155.91 (1.67%)
NASDAQ 2,020.90, +31.68 (1.59%)
S&P 500 1,026.13, +18.76 (1.86%)
NYSE Composite 6,676.26, +122.86 (1.87%)

Market internals confirmed that the rally was broad and deep, as 5027 stocks showed gains, to just 1467 on the losing side. There were 208 new highs to 93 new lows. Volume was solid, the best in weeks, indicating that this rally still has legs. Some analysts are calling for 1050 on the S&P and 10,000 on the Dow by the end of the year, and, while those estimates may seem trivial, there is a growing chorus of capitalist cheer-leading from corners as diverse as rural farming interests to chic fashion retailers. Even if there is another pullback, which will occur when everyone least expects it, as is the usual case, there's sufficient evidence to posit that even though various government entities (cities, states and federal) are running enormous deficits, it is that deficit spending money that kept people working and money flowing through the economy.

There will certainly come a time in which these debts must be dealt with, but nobody seems interested in dealing with those thorny issues at present. That day will come all too soon for investors and speculators, the wisest and craftiest of which have remade fortunes or made new ones during this six-month-long rally.

It was the seventh week out of the past eight that markets finished a week higher than the previous one, and gains have been substantial.

NYSE Volume 6,724,499,500
NASDAQ Volume 2,279,040,750

Oil was up again, but again only marginally, as on Thursday, gaining 12 cents, to $72.54. The metals were among the winners of the asset classes, with gold higher by $13.00, to close at $954.70. Silver had a nice reversal as well, picking up 28 cents, to $14.16 per ounce.

The day, and the week, were among the best seen for US business interests in more then 10 months. While the US may not be fully out of recession - though there are obvious signs that it is - the pathway of recovery is becoming more and more well-defined by the day.

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