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Today at the stock market
“U.S. stocks rose to more than three-week highs on Monday, recovering much of the losses sustained in a sell-off earlier this month, as a decline in Treasury yields assuaged investor concerns about rising interest rates and refocused attention on economic growth.
All three major indexes rose more than 1 percent. The S&P 500 is now just 3.2% below its peak on 26 Jan 2018). The CBOE Volatility Index (VIX) also dipped slightly to 15.8, though it remains above levels seen before the S&P’s peak.
The U.S. 10-year Treasury note yield eased to 2.8642%, slipping from a four-year high it hit last week. On Friday, the Federal Reserve said it expected economic growth to remain steady and saw no serious risks on the horizon that might alter its planned pace of interest rate hikes.
“It provides some relief that yields aren’t just going straight up,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. “Overall, earnings numbers continue to move higher. Investors still have confidence in the global economy.”
The major indexes fell from late-Jan 2018 peaks on concerns that rising inflation could cause the Fed to raise rates more than three times this year, as its previous statements indicated.
Investors will scrutinize testimony starting on Tuesday from Fed chairman Jerome Powell who faces questions from both houses of the U.S. Congress in his first major set piece since he took over from Janet Yellen this month.
Among the leading S&P 500 sectors were technology, which rose 1.6%, industrials, which rose 1.4%, and financials, which rose 1.5%. The broad gains across those cyclical sectors reflect investors’ focus on economic strength, Lerner said.
Qualcomm rose 5.8% after the chipmaker urged Broadcom to enter into price negotiations for the first time on Broadcom’s $117 billion offer for the company.
Berkshire Hathaway rose 4.0% after Warren Buffett said his conglomerate, which is sitting on $116 billion of cash, is “more inclined” to repurchase stock than pay dividends as a means to use excess cash.” Reuters
^ Market indices today (mouseover for 12 month view) Chart: Google Finance
|Index||Ticker||Today||Change||31 Dec 17||YTD|
|S&P 500||SPX (INX)||2,779.60||+1.17%||2,238.83||+3.96%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 17||YTD|
Portfolio stock prices
Amazon closed on a record high of $1,521.95, up 1.46% on Friday’s record close of $1,500.00.
|Stock||Ticker||Today||Change||31 Dec 17||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The Bloomberg Dollar Spot Index was essentially flat.
The EUR added 0.1% to USD 1.2312.
Japan’s JPY was little changed at 106.92 per USD.
Britain’s GBP dropped less than 0.1% to USD 1.3962.
The yield on 10-year Treasuries dropped one basis point to 2.86%, the lowest in almost 2 weeks.
Germany’s 10-year yield slid less than a basis point to 0.65% reaching the lowest in a month on its 5th straight decline.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
“Oil rose on Monday, hitting a two-and-a-half-week high, supported by strong U.S. demand and comments from Saudi Arabia that it would continue to curb production in line with OPEC-led efforts.
Brent crude rose 20 cents to $67.51/barrel at 11:35 a.m. (1635 GMT), after rising almost 4% last week. U.S. West Texas Intermediate futures rose 41 cents to $63.96/barrel after rising 3 percent last week. Both contracts earlier rose to their highest since 7 Feb 2018.
Prices were supported by Saudi Energy Minister Khalid al-Falih, who said on Saturday the country’s crude production in Jan – Mar 2018 would be well below output caps, with exports averaging less than 7 million barrels/day.
He said Saudi Arabia hoped OPEC and its allies would be able to relax output curbs next year and create a permanent framework to stabilize oil markets after the current agreement on supply cuts ends this year.
“A study is taking place and once we know exactly what balancing the market will entail, we will announce what is the next step. The next step may be easing of the production constraints,” he told reporters in New Delhi.
The possibility of an eventual end to production cuts, however, may be a bearish development longer-term, said Bob Yawger, director of energy futures at Mizuho.
Data released last week by the U.S. Energy Information Administration showed a surprise draw in crude inventories.
“Last week’s inventory report wasn’t bullish, but it also wasn’t bearish. And that got the bulls excited. Historically, this is usually a transitory kind of lull, where demand tapers back, we haven’t seen that yet,” said Bill Baruch, president of Blue Line Futures in Chicago.
Demand in Europe may also be getting some help. A cold snap across the continent has encouraged some refiners to delay maintenance, which could support demand and help end a bout of profit-taking, analysts said.
“Our view is demand will be strong enough, but we don’t see a big breakout,” said Natixis oil analyst Joel Hancock, adding the expected a price in the range of $60 to $70 this year.
Still, hedge funds and money managers upped their bullish wagers on U.S. crude oil for the first time in 4 weeks, data showed on Friday.
Meanwhile, Libya’s National Oil Corp said on Saturday it had declared force majeure on the 70,000 bpd El Feel oilfield after a protest by guards closed the field.” Reuters
Prices are as at 15:49 ET
- NYMEX West Texas Intermediate (WTI): $63.96/barrel +0.65% Chart
- ICE (London) Brent North Sea Crude: $67.54/barrel +0.34% Chart
- NYMEX Natural gas futures: $2.64/MMBTU +0.53% Chart
US: New Residential Sales. Jan 2018
Press Release Extract [us_newres]
New Home Sales
Sales of new single-family houses in January 2018 were at a seasonally adjusted annual rate of 593,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent (±19.0 percent) below the revised December rate of 643,000 and is 1.0 percent (±16.4 percent) below the January 2017 estimate of 599,000.
The median sales price of new houses sold in January 2018 was $323,000. The average sales price was $382,700.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of January was 301,000. This represents a supply of 6.1 months at the current sales rate.”
US Census Bureau, “New Residential Sales. Jan 2018“, 26 Feb 2018 More
“Sales of new U.S. single-family homes fell for a second straight month in Jan 2018, weighed down by steep declines in the Northeast and South, which could raise concerns the housing market is slowing down. The weak report from the Commerce Department on Monday came on the heels of data last week showing sales of previously owned homes dropped for a second consecutive month in Jan 2018 amid near record low housing inventory. A severe shortage of houses, especially on the lower end of the market, is pushing up prices and sidelining some first-time buyers.
New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They fell 1.0% from a year ago. Two-thirds of homes sold last month were under construction or yet to be built.
The PHLX housing index was trading lower, bucking a broadly firmer U.S. stock market. Prices of U.S. Treasuries were higher while the USD (Bloomberg DXY) was slightly stronger.
Rising mortgage rates could make buying a home even more expensive, especially if wage growth does not accelerate. Annual wage growth has been stuck below 3%, despite the unemployment rate having dropped to a 17-year low of 4.1%.
The 30-year fixed mortgage rate rose to an average of 4.40% in the week ended 22 feb 2018, the highest level since Apr 2014, from 4.38% in the prior week, according to mortgage finance agency Freddie Mac. It has increased for seven straight weeks. Mortgage rates are increasing in tandem with U.S. government bond yields on worries about rising inflation.
In Jan 2018, there were 301,000 new homes on the market, an increase of 2.4% and the highest level since Mar 2009. The stock of new homes still remains well below its peak during the housing market bubble in 2006.
Unless builders shift toward cheaper homes, the increase in inventory will probably do little to ease the supply crunch. Houses under construction accounted for 59% of inventory last month.
At January’s sales pace it would take 6.1 months to clear the supply of houses on the market, the most since Jul 2014 and up from 5.5 months in Dec 2017. A supply of 6 – 7 months is viewed as a healthy balance between supply and demand.
The median price for a new home increased 2.5% in Jan 2018 to $323,000 from a year ago.” Reuters
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei 225 movements over the past week Chart: Google Finance
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ Shanghai CSI300 movements over the past week Chart: Google Finance