Tuesday, June 23, 2015

Markets attempt to crawl higher on new homes sales

Dow added 24, advancers barely ahead of decliners & NAZ lost 10.  The MLP index rose 1 to the 416s & the REIT index fell 2+ to the 311s (both very near recent lows).  Junk bond funds were higher & Treasuries sold off, bringing the yield on the 10 year Treasury up to 2.4%.  Oil is back below 60 & gold also drifted lower.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYM....Crude Oil Aug 15...59.61 Down ....0.77  (1.3%)

GCM15.CMX...Gold Jun 15.......1,178.10 Down ...5.60  (0.5%)

Greek Prime Minister Tsipras turned to shoring up support at home for his plan to end a 5-month standoff with creditors that has brought his nation to the edge of default.  He needs to ensure his coalition to back proposals he outlined that include eliminating early retirement options, raising the sales tax, increasing taxes on middle- & high-income earners & introducing a new levy for companies with annual profit of more than €500K ($568K).  Tsipras is seeking to assuage the left flank of his party, some of whom want Greece to default on its debt altogether, by focusing on tax increases for companies & high-income individuals instead of spending cuts.  The left platform, which holds about 40 seats in parliament & is composed of former communists & others closely aligned with labor unions, could defeat the gov if its members vote against the plan.

Next for Tsipras: Holding Together His Coalition in Greece

Purchases of new homes in the US rose in May to the highest level in 7 years, signaling the industry is gaining momentum heading toward H2.  Sales climbed 2.2% to a 546K annualized pace, exceeding all forecasts & the most since Feb 2008, according to the Commerce Dept.  Readings for Feb-Apr were revised up.  Stronger employment & income prospects are bolstering would-be home buyers, allowing them to take advantage of relatively cheap borrowing costs.  The pickup in demand points to gains in construction of residential real estate that will contribute to GDP for the rest of the year.  The forecast  called for the pace to accelerate to 523K.  The median sales price declined 1% from May 2014 to $282K.  The increase in demand last month was led by an 87.5% surge in the Northeast, the biggest gain since Jul 2012.  The supply of homes at the current sales pace declined to 4.5 months from 4.6 months in Apr.  There were 206K new houses on the market at the end of May, the same as in the prior month.  Previously owned home purchases rose in May to their fastest pace since Nov 2009 & closings increased 5.1% to a 5.35M annualized rate as the share of sales to first-time buyers matched the strongest level since Sep 2012.  The housing industry has shown gradual gains in Q2 after the economy slumped in Q1.  Permits for future projects rose to the highest level in almost 8 years.  Homebuilders are feeling better about the outlook for sales.  The National Association of Home Builders/Wells Fargo builder sentiment gauge rose to 59 this month, the strongest since Sep & exceeding all projections, from 54 in May.

Sales of New U.S. Homes Increase

Orders for business equipment rose in May for just the 2nd time this year, indicating demand for American-made manufactured goods is stabilizing.  Bookings for non-military capital goods excluding aircraft rose 0.4% last month after a 0.3% decrease in Apr, according to the Commerce Dept.  Orders for all durable goods declined 1.8%, reflecting a drop in the volatile aircraft category.  The data indicate the worst of the slump in business investment in the oil patch may be over as fuel costs steady, which would alleviate a source of weakness for the economy.  Exports will probably take longer to rebound as the dollar’s appreciation makes American-made goods less competitive globally.  The forecast was for a fall of 1%.  Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, were projected to rise 0.5%.  Shipments of such goods, which are used to calculate GDP, increased 0.3% in May for a 2nd month.  A pickup in business investment would go a long way toward boosting growth.  Business investment excluding residential real estate declined at a 2.8% rate in Q1 as spending on mines, shafts & wells plunged almost 49% when companies sought to balance supply & demand amid a global oil glut.  A slump in exports after the dollar jumped in H2-2014 subtracted a percentage point from growth.  Demand for new autos is one thing buoying production as Americans replace their aging vehicles. Industry data showed cars & light trucks sold at a 17.7M annualized rate in May, the strongest pace in 10 years.  Commercial aircraft orders dropped 35% in May after falling 10.7% a month earlier.  Excluding transportation equipment, bookings increased 0.5%.  But a decline in inventories was one source of weakness.  Stockpiles fell 0.2% in May, the most in 2 years.  That may prompt some economists to cut Q2 growth estimates.  Gains in housing are probably helping to compensate for the slump in oil & gas drilling and in exports.

Orders for U.S. Capital Equipment Rise

The Greek debt mess remains center stage with nothing new except a lot of hot air.  Next Tues will be the 30th, & they will still be blowing a lot of hot air.  The new homes data was encouraging but capital spending data was limited by the reduction in inventories.  As has been the case for months (& years), economic progress in the US continues to be uneven.  However the popular averages are still hovering at or near record highs.

Dow Jones Industrials

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