Friday, August 23, 2013

Markets fluctuate after new home sales plunge

Dow inched up 2, advancers ahead of decliners 5-4 & NAZ added 10.  The MLP index jumped 3 to the 445s & the REIT index was up 1+ to the 264s.  Junk bond funds were mixed & Treasuries rose.  Oil was little changed & gold keeps charging towards 1400.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM....Crude Oil Oct 13...104.74 Down ...0.29  (0.3%)

GCQ13.CMX...Gold Aug 13.......1,375.90 Up ...4.70 (0.3%)

Microsoft CEO Steve Ballmer arrives for the launch of Windows 8 operating system in New York, in this file photo from October 25, 2012. REUTERS/Lucas Jackson/Files

Photo:   Yahoo

Microsoft Corp, a Dow stock, CEO Steve Ballmer will retire within the next 12 months, after a successor has been selected.  Ballmer said that he would have timed his retirement in the middle of the announced transformation to a devices & services company.  But he said: "We need a CEO who will be here longer term for this new direction."  The software company said its board had appointed a special committee to direct the process of appointing a new CEO.  The committee is chaired by John Thompson, the board's lead independent director, & includes Chairman Bill Gates, as well as other board members, Chuck Noski & Steve Luczo.  It will consider both external & internal candidates & is working with executive recruiting firm Heidrick & Struggles International.  The stock rose 2.32.

Microsoft CEO Ballmer to Retire Within Next 12 Months

Microsoft (MSFT)

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<p> FILE - In this July 9, 2013, file photo, a construction worker drills on the roof of a new home in New Paltz, N.Y. The Commerce Department reports on new-home sales for July, on Friday, Aug. 23, 2013. (AP Photo/Mike Groll, File)

Photo:   Yahoo

Americans cut back sharply in Jul on purchases of new homes, a sign that higher mortgage rates may weigh on the housing recovery.  The Commerce Dept said that new-home sales dropped 13.4% to an annual rate of 394K, the slowest pace in 9 months.  And it is down from an annual rate of 455K in Jun, which was revised sharply lower from a previously reported rate of 497K.  New-home sales have risen 7% in the 12 months ending in Jul.  But the annual pace remains well below the 700K consistent with a healthy market.  The housing market has been one of the strongest performers this year in an otherwise sluggish economy, helped by steady job gains & low mortgage rates.  However mortgage rates have risen a full percentage point since May & have started to steal some of the market's momentum.  In Jul, builders began work on the fewest single-family homes in 8 months & mortgage applications from potential buyers have fallen since rates have risen more than a percentage point.  The impact of higher mortgage rates has surfaced in the new-home market faster because the Jul sales report reflects signed contracts.  Sales of previously occupied homes reached at nearly 4-year high last month.  But that report measured completed sales, which typically reflects mortgage rates locked in a month or 2 earlier.  The housing recovery is expected to persist as mortgage rates remain relatively low by historical standards.  The average rate on a 30-year mortgage this week was 4.58%, according to Freddie Mac.  Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy.  Each home built creates an average of 3 jobs for a year & generates about $90K in tax revenue.

US new-home sales plunge as mortgage rates rise Associated Press

Fed's Lockhart: Won't Rule Out September Tapering

Photo:   Bloomberg

Federal Reserve Bank of Atlanta President Dennis Lockhart who has backed the Federal Reserve’s $85B monthly bond purchases, said he will support a slowing in bond purchases as long as economic reports remain strong.  “I would be supportive in September as long as the data between now and then basically confirm the path we’re on,” Lockhart said from Jackson Hole, Wyoming.  “I am confident in a continuation of this sort of moderate growth path.”  Treasury yields hit a 2-year high this week amid speculation the FOMC will slow its bond buying starting next month.  Policy makers are weighing when to begin reducing large-scale asset purchases, which they have pledged to maintain until the job market improves substantially.  The US economy will probably expand this year at a rate of 2-2½%, Lockhart said, & unemployment by the end of 2013 will probably be 7.2-7.4%.

Fed’s Lockhart Says He May Support QE Tapering in September

With no dramatic news, markets are not doing very much.  Oversold yield sectors are finding bargain hunters, but not much going on elsewhere.  DC politicos are on holiday & getting an earful from taxpayers about the fiscal mess & chaos in DC.  Next month they will have to deal with funding the gov for the next fiscal year & raising the debt ceiling.

Dow Jones Industrials

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