Tuesday, December 22, 2009

Higher home sales extend stock market rally

Dow continues strong, gaining 37, advancers over decliners 3-2 & NAZ is up 6. Banks are settling back after their recent rally taking the Financial Index off a 5 month low.


% Change

The Alerian MLP Index is up pennies, but at levels not seen in 18 months who's quibbling? The Dow Jones REIT Index rose small change, still at its best level this year. Junk bond funds continue to be in demand while Treasuries are selling off. The yield on the 10-year Treasury bond rose another 6 basis points to 3.74% heading for its yearly high of 4%. The high rates will put a damper on new mortgages.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index - YTD

Oil is not doing much while gold is struggling to find a floor from which it can rally. Falling below 1100, was a serious setback for the bulls.

CLG10.NYM...Crude Oil Feb 10...73.22 ...Down 0.50

GCZ09.CMX...Gold Dec 09...1,090.40 ...Down 6.50

GLD (ETF) --- 1 month

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The economy grew at a 2.2% rate in Q3, the recovery got off to a weaker start than previously thought (reported as a 2.8% annual rate). However, all signs suggest the economy will end the year on stronger footing. The main factors behind the downgrade: consumers didn't spend as much, commercial construction was weaker, business investment in equipment & software was a little softer plus companies cut back more on inventories. The economy is expected to have a stronger finish in Q4, possibly at a 4% rate. Such a rate would mark the strongest showing since the 5.4% growth almost 4 years ago.

Economy in U.S. Expanded at Less-Than-Forecast 2.2% Rate in Third Quarter

Home resales surged to the highest level in almost 3 years, reflecting an extraordinary level of federal support. The National Association of Realtors said sales rose 7.4% to an annual rate of 6.54M in Nov, from a downwardly revised pace of 6.09M in Oct. Sales were 44% above last year's levels, a record jump (but still off a low base). Sales had been expected to rise to an annual pace of 6¼M. The median sales price was $172K, down 4.3% from a year earlier & up 0.2% from Oct.

Existing U.S. Home Sales Rise to Highest Level Since 2007 in Recovery Sign

Sales of US Homes - 1 year

New Homes Sales - 1 year

The big snowstorm that slammed the Northeast hurt retailers, they are counting even more on a spending surge in the final days before Christmas. Housing sales while up, are still substantially below levels from a few years ago. There is an estimate that 10% of the mortgages are delinquent, not to mention the huge inventory of homes for sale. But bulls want to take the markets higher & may succeed if the rally regains steam.

Dow Jones Industrials --- 2 weeks

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