Dow rebounded 120, advancers over decliners better 3-1 & NAZ gained 24. The MLP index added 1+ to the 289s & the REIT index rose pennies in the 354s. Junk bond funds did little & Treasuries were sold as stocks advanced. Oil & gold crawled higher.
AMJ (Alerian MLP Index tracking fund)
The € steadied after erasing gains when ECB officials suggested financial markets misinterpreted comments from Mario Draghi on the rise of inflation. US stocks rebounded from the biggest drop in 6 weeks. The shared currency fell from the highest level in a year after 3 Eurosystem officials said Draghi’s speech yesterday was intended to strike a balance between recognizing the currency bloc's economic strength & warning that monetary support is still needed. Bonds in the region rebounded & US stocks rose in a broad rebound. Crude fluctuated just above $44 a barrel before gov data. The ECB about-face rekindled a risk on mood in financial markets less than a day after a host of events sparked caution. Investors turned attention to signs of global growth, looking past a trio of Federal Reserve speakers who suggested that asset prices had become elevated, an IMF cut to its US growth forecast, a fresh blow to the Rep agenda in DC & a global cyberattack.
U.S. Stocks Rebound, Euro Flat After ECB Comments: Markets Wrap
The narrower US merchandise trade deficit & increases in inventories may boost estimates of economic growth this qtr, according to preliminary May figures from the Commerce Dept. Goods-trade gap shrank to $65.9B (est. $66B) from $67.1B the prior month. Wholesale inventories rose 0.3% M/M (est. 0.2% gain). Retail stockpiles climbed 0.6% M/M, most in 4 months. With rising inventories & overseas demand, the data could spur some analysts to boost estimates for the pace of US expansion in Q2, adding to any rebound following a tepid 1.2% pace in Q1. Economists look to the advance report on trade & inventories, the 2 most volatile parts of the calculation for GDP, to adjust forecasts for quarterly growth. In Q1, trade added 0.13 percentage point to GDP, while inventories subtracted 1.07 percentage point. Exports of goods rose 0.4% in May from the previous month & imports fell 0.4%. Outbound shipments were led by a 4.8% rise in automobiles & a 6% increase in consumer goods. Imports of consumer merchandise, autos & foods declined while capital goods increased. Inventories at motor vehicles & parts dealers rose 1.1%; excluding autos, retail stockpiles were up 0.3%. Wholesale inventories of durable goods climbed 0.4% & stocks of nondurable goods gained 0.1%. Exports & imports of goods accounted for about ¾ of America's total trade in 2016 (the US typically runs a deficit in merchandise trade & a surplus in services).
Contracts to buy previously owned US homes unexpectedly fell in May, the 3rd straight monthly decline, as a lack of homes for sale on the market crimped supply. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, dropped 0.8% to 108.5. Pending home sales fell in the Northeast, South & West, & were flat in the Midwest. The forecast was for pending home sales increasing 0.8%. Pending home sales were down 1.7% from a year ago. "A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly," NAR chief economist Lawrence Yun said. Housing demand is being driven by a strong economy & tight labor market. The unemployment rate fell in May to a 16-year low of 4.3%. A lack of inventory has pushed up prices, particularly for more expensive homes. Home prices increased 26% for properties priced between $750K - $1M compared to the same month last year. Pending home sales contracts become sales after a month or 2. Last month's fall suggests that home resales, which rebounded last month to the 3rd highest monthly level in a decade, may also falter in the coming months.
Once again, words matter. A closer look at what Draghi had to say yesterday calmed nervous traders' nerves. The stock market rally is still dependent on easy money & any possible disturbance to that scenario is unsettling. More important for the US market, healthcare reform is stuck in the mud. Oil has found some buying, although that may come from a heavily oversold market. REITs & junk bond funds are hanging in there fairly while while the Dow is just under its record close (thanks to buying in Jun).
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 44.26 | 0.02 | 0.1% |
| GC=F | Gold | 1,251.60 | 4.70 | 0.4% |
The € steadied after erasing gains when ECB officials suggested financial markets misinterpreted comments from Mario Draghi on the rise of inflation. US stocks rebounded from the biggest drop in 6 weeks. The shared currency fell from the highest level in a year after 3 Eurosystem officials said Draghi’s speech yesterday was intended to strike a balance between recognizing the currency bloc's economic strength & warning that monetary support is still needed. Bonds in the region rebounded & US stocks rose in a broad rebound. Crude fluctuated just above $44 a barrel before gov data. The ECB about-face rekindled a risk on mood in financial markets less than a day after a host of events sparked caution. Investors turned attention to signs of global growth, looking past a trio of Federal Reserve speakers who suggested that asset prices had become elevated, an IMF cut to its US growth forecast, a fresh blow to the Rep agenda in DC & a global cyberattack.
U.S. Stocks Rebound, Euro Flat After ECB Comments: Markets Wrap
The narrower US merchandise trade deficit & increases in inventories may boost estimates of economic growth this qtr, according to preliminary May figures from the Commerce Dept. Goods-trade gap shrank to $65.9B (est. $66B) from $67.1B the prior month. Wholesale inventories rose 0.3% M/M (est. 0.2% gain). Retail stockpiles climbed 0.6% M/M, most in 4 months. With rising inventories & overseas demand, the data could spur some analysts to boost estimates for the pace of US expansion in Q2, adding to any rebound following a tepid 1.2% pace in Q1. Economists look to the advance report on trade & inventories, the 2 most volatile parts of the calculation for GDP, to adjust forecasts for quarterly growth. In Q1, trade added 0.13 percentage point to GDP, while inventories subtracted 1.07 percentage point. Exports of goods rose 0.4% in May from the previous month & imports fell 0.4%. Outbound shipments were led by a 4.8% rise in automobiles & a 6% increase in consumer goods. Imports of consumer merchandise, autos & foods declined while capital goods increased. Inventories at motor vehicles & parts dealers rose 1.1%; excluding autos, retail stockpiles were up 0.3%. Wholesale inventories of durable goods climbed 0.4% & stocks of nondurable goods gained 0.1%. Exports & imports of goods accounted for about ¾ of America's total trade in 2016 (the US typically runs a deficit in merchandise trade & a surplus in services).
Narrower U.S. Trade Gap May Boost Growth Pace in Second Quarter
Contracts to buy previously owned US homes unexpectedly fell in May, the 3rd straight monthly decline, as a lack of homes for sale on the market crimped supply. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, dropped 0.8% to 108.5. Pending home sales fell in the Northeast, South & West, & were flat in the Midwest. The forecast was for pending home sales increasing 0.8%. Pending home sales were down 1.7% from a year ago. "A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly," NAR chief economist Lawrence Yun said. Housing demand is being driven by a strong economy & tight labor market. The unemployment rate fell in May to a 16-year low of 4.3%. A lack of inventory has pushed up prices, particularly for more expensive homes. Home prices increased 26% for properties priced between $750K - $1M compared to the same month last year. Pending home sales contracts become sales after a month or 2. Last month's fall suggests that home resales, which rebounded last month to the 3rd highest monthly level in a decade, may also falter in the coming months.
US pending home sales unexpectedly drop in May
Once again, words matter. A closer look at what Draghi had to say yesterday calmed nervous traders' nerves. The stock market rally is still dependent on easy money & any possible disturbance to that scenario is unsettling. More important for the US market, healthcare reform is stuck in the mud. Oil has found some buying, although that may come from a heavily oversold market. REITs & junk bond funds are hanging in there fairly while while the Dow is just under its record close (thanks to buying in Jun).
Dow Jones Industrials
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