Tuesday, December 24, 2013

Higher markets on new homes sales data

Dow rose 40, advancers over decliners almost 2-1 & NAZ inched up 2.  The MLP index continued strong, rising 3 to the 454s, & the REIT index was up fractionally in the 266s.  Junk bond funds were mixed & Treasuries pulled back, taking the yield on the 10 year Treasury near 3%.  Oil rose while gold continues to waver near 1200.

AMJ (Alerian MLP Index tracking fund)

stock chart

Yield Securities:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLG14.NYM...Crude Oil Feb 14...99.09 Up ...0.18 (0.2%)

GCZ13.CMX...Gold Dec 13.....1,202.80 Up ....4.40 (0.4%)

Politicos promised the budget deal would mark an end to DC endless cycle of fiscal showdowns.  There’s one step left: writing an encyclopedic spending bill funding every agency in the gov, even the ones they don’t like.  Congress has less than a month to do it before a Jan 15 deadline, one final test of whether bipartisanship will last when Dems & Reps get to the fine print.  For example, many spending provisions, from funding the EPA regulatory oversight to cutting defense spending that could cost local jobs, will be ripe for attack ads from House & Senate primary challengers in the 2014 election.  Budget negotiators’ agreement earlier this month only sets spending priorities.  The bill lawmakers are now negotiating would actually spend money.  The goal is to allocate funds for the entire federal gov by Jan 6, when Congress returns after a holiday break.  The measure has to be passed & signed into law by Jan 15 to avert a 2nd gov shutdown in 4 months.  Bills funding the Labor & Health & Human Services Depts, the Interior Dept & EPA are the most likely to upset the bill-writing process.  Among the greatest challenges will be resolving funding for implementing Obamacare.  A number of Reps plan to oppose any funds for that.  The Rep chairman of the House Labor & Health subcommittee, Jack Kingston, is running for an open Senate seat in Georgia next year.  He’s positioning himself as the most conservative candidate in a primary likely to include at least 6 candidates, including other House members.  The wild west ways of DC are still around.

Budget Resolves Some U.S. Fiscal Woes With Spending Fights Ahead

Purchases of new homes exceeded projections in Nov, holding near a 5 year high & showing the housing recovery was gaining momentum even as mortgage rates climbed.  Sales declined 2.1% to a 464K annualized pace, following a revised 474K rate in Oct (the strongest since 2008), according to the Commerce Dept.  The forecast called for 440K. Home purchases are strengthening as builders respond to pent-up demand unleashed by employment gains & record-high stock prices.  Applications for building permits held near a 5 year high in Oct, signaling a pickup in new-home construction will be maintained into 2014.  The market is on pace to reach 435K new homes sold this year, the most since 2008.  The median sales price for a new home climbed 10.6% from Nov 2012 to $270K.  The supply of homes dropped to 4.3 months, the lowest since Jun, from 4.5 months in Oct.  There were 167K new houses on the market at the end of Nov, down from 179K the prior month.  New-home sales, tabulated when contracts are signed, are considered a timelier barometer than purchases of previously owned dwellings, which are calculated when a contract closes. New construction accounted for about 7% of the residential market in 2012.  Building permits fell 3.1%  from the prior month to a 1.01M rate.  The 1.04M in Oct was the highest since Jun 2008.  At the same time, sales of previously owned homes declined for the 3rd consecutive month in Nov to the lowest level of the year as rising mortgage rates and a limited supply of properties discouraged buyers.

Sales of New Homes in U.S. Exceeded Forecasts in November

Trading is very quiet & markets will close early, not a lot is getting done.  The bulls are in charge during this holiday period.  Thurs & Fri should also be lackluster days with a bias on the upside.  But the 10 year Treasury yield near 3% is one cloud over the markets.

Dow Jones Industrials

stock chart

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