Wall Street wasn't particularly troubled over the fact that new home sales fell for the third month in a row, and by the end of the day, it hardly mattered, as stocks staged a mild comeback from opening losses.
The drop of 1.5% (511,000 annualized, seasonally adjusted) was led by a huge, 23.6% plunge in the West, according to the commerce department. The median home price also fell, to 288,000, a level many are finding difficult to justify.
For instance, even at today's low rates, a $250,000, 30-year mortgage runs $1,088 per month, with interest paid over the life of the loan of $141,686, making the total amount paid a stunning $391,686. With more than half the wage-earners in the United States making less than $30,000 per year, that's a price too high to bear, but, that's what the Fed has thrust upon would-be homebuyers in their quest to boost asset prices and inflation.
Many new-home buyers of today will find themselves stuck - like many home owners during the sub=prime bust - if interest rates rise over the coming years. Not only will these buyers be burdened by an enormous debt, their properties would become unsalable, due to a glut on the market and higher carrying costs. That same $250,000 mortgage, at, say 5%, would jump to $1,342, making the now-used home even less affordable and the current residents trapped in an underwater condition.
It's actually surprising that anybody is actually building and buying new homes. The prices are at astronomical levels. The median home price may actually have peaked a few months ago, hitting a record 317,000 in November, 2015, setting the stage for another round of hand-wringing by banks and homeowners alike when the next recession hits, something for which the US economy is now overdue. It's been eight years since the last one and the Fed has not convinced anyone that it has finally vanquished the business cycle; they've only managed to delay the inevitable.
Speaking of the Fed, the FOMC begins a two-day meeting at which they will do nothing other than remind the world that they are in control of everything and that the US economy is still not to their liking, meaning another rate hike is still months away, if at all. Normalizing rates may prove to be the undoing of central banking, because it will absolutely destroy many leveraged, hedged market constituents.
Monday's Mangled Mess:
S&P 500: 2,087.79, -3.79 (0.18%)
Dow: 17,977.24, -26.51 (0.15%)
NASDAQ: 4,895.79, -10.44 (0.21%)
Crude Oil 42.86 -1.99% Gold 1,239.10 +0.74% EUR/USD 1.1269 +0.42% 10-Yr Bond 1.90 +0.74% Corn 384.50 +2.40% Copper 2.25 -0.60% Silver 16.99 +0.53% Natural Gas 2.19 -3.22% Russell 2000 1,138.09 -0.75% VIX 14.08 +6.51% BATS 1000 20,682.61 0.00% GBP/USD 1.4483 +0.16% USD/JPY 111.1950 -0.56%
Showing posts with label median home prices. Show all posts
Showing posts with label median home prices. Show all posts
Monday, April 25, 2016
Tuesday, July 28, 2009
Markets Take a Breather... Topped Out?
Just a quick peed at a short term chart of the Dow indicates that stocks have stalled over the last three sessions as earnings season winds down. What seems to be a psychological barrier exists at the 9100 level, but underpinning the pressure on traders is the non-confirmation in the Dow Jones Transportation Index (DJT) that was spoken of here last week.
Without confirmation of a breakout in the transports above the 3717 (January 6, 2009) level (currently 3523), there will be no talk of a new bull market, even though the possibility of one emerging still exists. Traders and analysts are becoming increasingly cautious about making market predictions, still reeling from the effects of last Autumn's tsunami of price declines.
There's also some confusion about just where stocks would have to go in order for a new bull to be proclaimed. Since the current bear is closing in on two years of age (October 2007), this bear may not have much further to proceed. At the very least, the rebound from March is encouraging to the bulls, as the incipient rally will soon reach 5 months. As bear market rallies go, that's a reasonable time frame. Naturally, continued gains would produce the much-desired "V bottom," though macro forces and experience tell us that a "W" is more likely, with the potential for either a truncated or extended third leg possible. For reference, take a look at a Dow chart of 2002-2003, where the Index bottomed just above 7500 at the end of September 2002, and rallied for a short time until hitting the next bottom around 7850 in March, 2003, just over 5 months later.
There were more zig-zags and I am oversimplifying, but the pattern is there for analysis, and could be re-emerging. Also notable is that the War in Iraq began with the beginning of the bull in March, 2003. There may be comparable political and military implications afoot, with increased troop presence in Afghanistan, though other conditions are not so closely aligned.
The issue is whether stocks on the Industrial and Transport indices have to reach January 2009 levels for confirmation or go back to November 2008 rebound highs. There's a big difference. On the Industrials, the November high was 9625; for the transports, a nip over 4000 is the sweet spot.
In any case, hedging for another down leg might be the prudent course at this point in time.
Dow 9,096.72, -11.79 (0.13%)
NASDAQ 1,975.51, +7.62 (0.39%)
S&P 500 979.62, -2.56 (0.26%)
NYSE Composite 6,328.67, -35.99 (0.57%)
The major indices spent almost the entire session in the red, with only the NASDAQ ending positive, a recurring theme. advancing issues held sway slightly over losers, 3163-3130. There were 165 new highs to just 71 new lows, lending credence to the bull ideology. Volume was moderately better than the past two sessions, another bullish signal.
NYSE Volume 1,280,160,000
NASDAQ Volume 2,236,427,000
If the stock market is taking a pause from screaming "recovery," commodities are singing a deflationary tune. September crude fell $1.15, to $67.23. Gold dropped $14.60, to $941.70. Silver lost 25 cents, to $13.74, though the precious metals are coming off two productive weeks of gains. Livestock and grain futures continued to experience price pressures.
There was little in the way of corporate earnings, though Office Depot (ODP) experienced a large second quarter loss. With businesses of every size cutting back, that's not much of a surprise. The stock lost nearly 20%, down 97 cents, to 4.38.
US Steel (X) reported a loss of $392 million, or $2.92 per share for the quarter ended June 30. Sagging demand for steel and steel products has pushed prices lower and crippled most producers. Fallout from the auto business is seen as a major factor affecting both prices and the profits of steel companies. The loss was the second straight quarterly for US Steel.
The S&P/Case-Shiller Home Price Index showed its first gain in nearly three years, though it could be more of a one-off than anything else. After dropping for 34 straight months, the 0.5% increase may amount to nothing more than a rounding error. With foreclosures still extremely high and unemployment showing few signs of abating, home prices may do a double-dip, just like stocks.
Without confirmation of a breakout in the transports above the 3717 (January 6, 2009) level (currently 3523), there will be no talk of a new bull market, even though the possibility of one emerging still exists. Traders and analysts are becoming increasingly cautious about making market predictions, still reeling from the effects of last Autumn's tsunami of price declines.
There's also some confusion about just where stocks would have to go in order for a new bull to be proclaimed. Since the current bear is closing in on two years of age (October 2007), this bear may not have much further to proceed. At the very least, the rebound from March is encouraging to the bulls, as the incipient rally will soon reach 5 months. As bear market rallies go, that's a reasonable time frame. Naturally, continued gains would produce the much-desired "V bottom," though macro forces and experience tell us that a "W" is more likely, with the potential for either a truncated or extended third leg possible. For reference, take a look at a Dow chart of 2002-2003, where the Index bottomed just above 7500 at the end of September 2002, and rallied for a short time until hitting the next bottom around 7850 in March, 2003, just over 5 months later.
There were more zig-zags and I am oversimplifying, but the pattern is there for analysis, and could be re-emerging. Also notable is that the War in Iraq began with the beginning of the bull in March, 2003. There may be comparable political and military implications afoot, with increased troop presence in Afghanistan, though other conditions are not so closely aligned.
The issue is whether stocks on the Industrial and Transport indices have to reach January 2009 levels for confirmation or go back to November 2008 rebound highs. There's a big difference. On the Industrials, the November high was 9625; for the transports, a nip over 4000 is the sweet spot.
In any case, hedging for another down leg might be the prudent course at this point in time.
Dow 9,096.72, -11.79 (0.13%)
NASDAQ 1,975.51, +7.62 (0.39%)
S&P 500 979.62, -2.56 (0.26%)
NYSE Composite 6,328.67, -35.99 (0.57%)
The major indices spent almost the entire session in the red, with only the NASDAQ ending positive, a recurring theme. advancing issues held sway slightly over losers, 3163-3130. There were 165 new highs to just 71 new lows, lending credence to the bull ideology. Volume was moderately better than the past two sessions, another bullish signal.
NYSE Volume 1,280,160,000
NASDAQ Volume 2,236,427,000
If the stock market is taking a pause from screaming "recovery," commodities are singing a deflationary tune. September crude fell $1.15, to $67.23. Gold dropped $14.60, to $941.70. Silver lost 25 cents, to $13.74, though the precious metals are coming off two productive weeks of gains. Livestock and grain futures continued to experience price pressures.
There was little in the way of corporate earnings, though Office Depot (ODP) experienced a large second quarter loss. With businesses of every size cutting back, that's not much of a surprise. The stock lost nearly 20%, down 97 cents, to 4.38.
US Steel (X) reported a loss of $392 million, or $2.92 per share for the quarter ended June 30. Sagging demand for steel and steel products has pushed prices lower and crippled most producers. Fallout from the auto business is seen as a major factor affecting both prices and the profits of steel companies. The loss was the second straight quarterly for US Steel.
The S&P/Case-Shiller Home Price Index showed its first gain in nearly three years, though it could be more of a one-off than anything else. After dropping for 34 straight months, the 0.5% increase may amount to nothing more than a rounding error. With foreclosures still extremely high and unemployment showing few signs of abating, home prices may do a double-dip, just like stocks.
Monday, January 26, 2009
What the Market Knows (and Washington Doesn't)
Monday's attempted push into higher ground was cut short by the very same forces which pushed it down to these levels in the first place: jobs, bank failures and government deficits.
The key sticking point, which the market understands (as do most chartists, but not politicians) is the 8149 level on the Dow. Why that spot is so stubborn and steadfast, not allowing movement beyond it, now that it has been violated, is that it is the interim closing low (Dec. 1) following the devastating bottom of November 20 (7552.29). Since violating this level by closing at 7949.09 on January 20, the index has tried to break out every day since. On January 21, the Dow did manage to hold on, at the close, at 8228.10, but since has closed below 8149 three consecutive sessions.
This is a troubling scenario. Not even the unexpected rise in existing home sales (+6.5%, though the median home price continues to fall) and the Conference Board's rosier outcome in the Leading Indicators (+0.3%) could keep stocks sufficiently in the green to call today's effort a true rally.
As a matter of fact, the Dow finished more than 100 points off its high, which was achieved shortly after the pair of announcements at 10:00 am. It was only a late day surge that allowed the index to finish with any gain at all. Other indices were similarly in positive territory at the close, though with marginal gains.
Dow 8,116.03, +38.47 (0.48%)
NASDAQ 1,489.46, +12.17 (0.82%)
S&P 500 836.57, +4.62 (0.56%)
NYSE Composite 5,244.67, +49.12 (0.95%)
Perhaps equally troubling was the lack of commitment as measured by volume, off sharply from last week's somewhat more spirited efforts. On the day, advancing issues finished well ahead of decliners, 4207-2354, though the gap between new lows and highs remains troubling, with new lows ahead once more, 200-16.
NYSE Volume 1,269,394,000
NASDAQ Volume 1,841,378,000
Crude oil finished the day with a loss of 74 cents, easing to $45.73 at the close after trading as high as $48.05. Gold continued its own little winning streak, gaining $13.00, to $910.70. the first close above the $900 mark since early December. Silver tagged along with a gain of 17 cents, closing at $12.11. We are beginning to be convinced that the only safe place for your cash - besides in a mattress - is in precious metals.
What the politicians in Washington don't seem to understand at this juncture is twofold: first, that the stock market will not respond blindly to their grandstanding on economic issues and postures on bailouts, stimulus packages and the like, and second, that the number of Americans out of work or underemployed has now reached crisis proportions.
Just today, another 68,000+ layoffs were announced, by titans such as Caterpillar (20,000), Pfizer (merging with Wyeth, 26,000), Sprint Nextel (8000) and Home Depot (7000). Other companies, such as Dutch financial firm ING, and farm equipment maker Deere, also announced layoffs which slice across national borders.
The US economy shed 2.6 million jobs in 2008 - the most since 1945 - and there have already been 200,000 announced layoffs this year, though the real figures of unemployed and underemployed continue to spiral to nosebleed levels. Some estimates have the total of both groups already at 13-15% of the adult labor force.
In Washington, there's plenty of pomp and posture about how to correct the dilemma, but it surely seems that the worst is still ahead as the effects of multiple retail chain store closings and the consequent defaults in commercial loan portfolios begin to ripple through the economy.
Our political leaders have yet to either catch on or level with the American people about the depth of our economic crisis, preferring to "stick to their agenda" while offering little in the way of serious stimulative effort.
The stock market is just another ticking time bomb at this point. Anybody telling you to buy stocks here just doesn't understand the fix we're in and might as well instruct you to throw money down a well.
The key sticking point, which the market understands (as do most chartists, but not politicians) is the 8149 level on the Dow. Why that spot is so stubborn and steadfast, not allowing movement beyond it, now that it has been violated, is that it is the interim closing low (Dec. 1) following the devastating bottom of November 20 (7552.29). Since violating this level by closing at 7949.09 on January 20, the index has tried to break out every day since. On January 21, the Dow did manage to hold on, at the close, at 8228.10, but since has closed below 8149 three consecutive sessions.
This is a troubling scenario. Not even the unexpected rise in existing home sales (+6.5%, though the median home price continues to fall) and the Conference Board's rosier outcome in the Leading Indicators (+0.3%) could keep stocks sufficiently in the green to call today's effort a true rally.
As a matter of fact, the Dow finished more than 100 points off its high, which was achieved shortly after the pair of announcements at 10:00 am. It was only a late day surge that allowed the index to finish with any gain at all. Other indices were similarly in positive territory at the close, though with marginal gains.
Dow 8,116.03, +38.47 (0.48%)
NASDAQ 1,489.46, +12.17 (0.82%)
S&P 500 836.57, +4.62 (0.56%)
NYSE Composite 5,244.67, +49.12 (0.95%)
Perhaps equally troubling was the lack of commitment as measured by volume, off sharply from last week's somewhat more spirited efforts. On the day, advancing issues finished well ahead of decliners, 4207-2354, though the gap between new lows and highs remains troubling, with new lows ahead once more, 200-16.
NYSE Volume 1,269,394,000
NASDAQ Volume 1,841,378,000
Crude oil finished the day with a loss of 74 cents, easing to $45.73 at the close after trading as high as $48.05. Gold continued its own little winning streak, gaining $13.00, to $910.70. the first close above the $900 mark since early December. Silver tagged along with a gain of 17 cents, closing at $12.11. We are beginning to be convinced that the only safe place for your cash - besides in a mattress - is in precious metals.
What the politicians in Washington don't seem to understand at this juncture is twofold: first, that the stock market will not respond blindly to their grandstanding on economic issues and postures on bailouts, stimulus packages and the like, and second, that the number of Americans out of work or underemployed has now reached crisis proportions.
Just today, another 68,000+ layoffs were announced, by titans such as Caterpillar (20,000), Pfizer (merging with Wyeth, 26,000), Sprint Nextel (8000) and Home Depot (7000). Other companies, such as Dutch financial firm ING, and farm equipment maker Deere, also announced layoffs which slice across national borders.
The US economy shed 2.6 million jobs in 2008 - the most since 1945 - and there have already been 200,000 announced layoffs this year, though the real figures of unemployed and underemployed continue to spiral to nosebleed levels. Some estimates have the total of both groups already at 13-15% of the adult labor force.
In Washington, there's plenty of pomp and posture about how to correct the dilemma, but it surely seems that the worst is still ahead as the effects of multiple retail chain store closings and the consequent defaults in commercial loan portfolios begin to ripple through the economy.
Our political leaders have yet to either catch on or level with the American people about the depth of our economic crisis, preferring to "stick to their agenda" while offering little in the way of serious stimulative effort.
The stock market is just another ticking time bomb at this point. Anybody telling you to buy stocks here just doesn't understand the fix we're in and might as well instruct you to throw money down a well.
Thursday, February 15, 2007
Dow Rockets 100+ in 2 days; Nasdaq Flirts with 2500
After gaining 87 points on Wednesday and reaching another all-time high, the Dow Jones Industrial Average tacked on 23 more Thursday to close at 12, 765.01. Fueled by positive comments from Fed Chairman Ben Bernanke, stabilizing oil prices and benign economic news, investors poured into blue chips, techs and small caps, extending the bull run begun in October 2002.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
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