- Three major US stock indexes green, but the Nasdaq is far from the peaks
- Energy leads the gains among S&P sectors; lone loser comm svcs
- Euro STOXX 600 index up 0.2%
- Dollar, rise in crude; gold bitcoin down
- The 10-year US Treasury yield is ~ 1.60%
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EXISTING HOUSES SALES: ALL NEW (1120 EST / 1620 GMT)
Investors began Thanksgiving week by thanking President Joe Biden for keeping Fed Chairman Jerome Powell’s firm hand on the monetary policy bar, and also expressing gratitude for some better-than-economic data. planned in the form of sales of existing homes.
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For the past few months, the real estate market has been the has-been of the economic recovery, a victim of its early fame.
Mandatory closures initially sparked a suburban rush, sending demand – as well as house prices – to the moon, a phenomenon that is driving the prospect of homeownership beyond the realm of affordability for many potential buyers. .
But the industry has recently shown signs of a return to normal.
Used home sales in the United States rose 0.8% last month to 6.34 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (NAR).
The number stood at 140,000 units above consensus and marked a slight acceleration from September’s 0.7% gain.
The rise helped keep the market’s housing stock stable at 2.3 months of supply – below the historic average but up from the record low of 1.8 months reached last December.
âHome sales remain resilient, despite low inventories and growing affordability challenges,â writes Lawrence Yun, NAR chief economist at NAR.
Yun also points out that just as the industry benefited from the onset of the pandemic, it could experience a second wind due to the current wave of inflation.
“Inflationary pressures, such as rapidly rising rents and rising consumer prices, may cause some potential buyers to seek the protection of a fixed and constant mortgage payment,” he said.
The easing of the credit environment has also provided some support, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“For mortgaged buyers, the rebound in sales has been supported by lower rates since their spring peak and a sharp easing in credit standards,” Shepherdson notes.
The NAR print is perfectly in line with other recent housing data, particularly the 4% increase in building permits and a rebound in homebuilder sentiment, both released last week.
While economic data reflects recent activity, the stock market provides a forward-looking indicator, reflecting where investors see the housing sector in six months to a year.
Real estate stocks – namely the Philadelphia SE Housing Index (.HGX) and S&P 1500 Home Building Index (.SPCOMHOME) – significantly outperformed the overall market as the global health crisis took its toll.
But as the chart below illustrates, over the past 12 months, the HGX and SPCOMHOME indices are now essentially neck and neck with the benchmark S&P 500 (.SPX).
Wall Street turned greener as the morning progressed, with all three major indices registering healthy gains in a broad rally.
Small caps (.RUT), chips (.SOX) and transport (.DJT) are leading the charge, all signs of economic optimism.
BANK SHARES HIGHEST FOR POWELL SECOND TERM (1050 EST / 1550 GMT)
Shares of the largest U.S. bank stocks (.SPXBK) outperform the broader market on Monday after the White House announced it would appoint current Federal Reserve Chairman Jerome Powell for a second four-year term while for vice president, she picked Lael Brainard, the Fed board member who was seen as the other main candidate for the top job. Read more
âThere is a certain consensus on the street that Brainard is quite to the left of Powell in terms of his political views and would be much tougher on banks through regulation and through scrutiny of merger and merger activity. acquisition, âsaid RJ Grant, head of commerce at Keefe, Bruyette & Woods in New York, specializing in financial equity trading.
“It’s a bit of an initial rally of relief that Powell is a bit more of a friendly Wall Street pick.”
While Biden has yet to fill three seats at the Fed, including that of vice president for supervision, a key role for banking regulation, investors seemed confident that Powell would be able to set the tone for regulation.
Grant said it was somewhat unusual for a Fed chairman to be re-appointed by a Democratic president after being initially signed by a Republican president.
“He found a way to navigate both sides of the aisle quite well. And I think there is a quorum that he’s a strong leader during a tough time.” he said.
âHe was the Fed chief during a very tumultuous time with COVID. He handled (former President Donald) Trump’s situation pretty well, which was sloppy and unpleasant at times,â Grant said. “People generally feel better about the direction of the economy under Powell.”
The S&P 500 Banks Index (.SPXBK) is up 2.4% and is on track for its biggest daily percentage gain since September 23. Among the group’s biggest winning percentages are SVB Financial (SIVB.O), Wells Fargo (WFC.N) and People United Financial (PBCT.O).
POWELL APPOINTMENT RAISES INVESTORS IN US EQUITIES (1010 EST / 1510 GMT)
All three major US stock indexes are significantly higher in morning trading in New York, with the S&P 500 (.SPX) and Nasdaq (.IXIC) hitting record highs, as President Joe Biden picks Federal Reserve chairman , Jerome Powell, to lead the central bank for a second term.
Investors appeared to be applauding the news, as a second term for Powell could allay some concerns about a change in the status quo.
S&P 500 rate sensitive financials (.SPSY) are up over 1% and industry leading earnings and technology (.SPLRCT) are also up over 1%.
“My reaction is a reaction of relief. It was a steady hand, I think people generally liked the policies he has adopted since Covid first became an issue,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
(Caroline Valetkevitch, Lewis Krauskopf)
SHARE BUYBACKS IN THE UNITED STATES RECORDED IN Q3 (0921 EST / 1421 GMT)
S&P 500 (.SPX) companies made record quarterly share buybacks in the third quarter of 2021, amounting to $ 225 billion, beating the previous record of $ 223 billion in the fourth quarter of 2018, according to data from S&P Dow Jones Indices.
Given the annual record of $ 806 billion set in 2019, a buyout in the December quarter as well as the undeclared third quarter of $ 204 billion in buybacks would set a new annual record, the senior analyst on Saturday wrote on Saturday. Howard Silverblatt clues in a research note. The 12-month high is $ 823 billion, set in the 12-month period ending March 2019.
âAt this point, I have set a new annual record, with a new 12-month record in the works,â said Silverblatt.
Buybacks have exploded this year after reaching $ 89 billion in the second quarter of last year as the U.S. economy came to a halt due to the pandemic.
NASDAQ COMPOSITE: FLYING ON SMOKE? (0845 EST / 1345 GMT)
The Nasdaq Composite (.IXIC) is currently on track to rise by around 25% this year. This puts its three-year rolling increase on track to reach 142%. This would be its biggest increase since the three-year period ending December 31, 1999, just before the tech bubble burst.
Meanwhile, the IXIC finished Friday at an all-time high. That’s 46 records so far in 2021 compared to 55 for the whole of last year.
However, a measurement of the internal resistance of the composite deteriorated again:
After peaking at 75.7% earlier this month, which was well below its 2021 highs, the Nasdaq New High / New Low (NH / NL) index fell to 53.3% Friday. It was its weakest reading, with the IXIC at a record close, since August 30. At the time, five trading days later, the composite index peaked and then slipped all the way to 8% from its October low.
It should be noted that since the start of 2020 there have been five sharp IXIC declines from record territory, averaging around 15%, all preceded by a divergence of the NH / NL index over several weeks. /several months.
Unless this metric can at least recover its declining 10-day moving average, the risk is that it will continue to decline to test the 2020 low, which was 1.2%.
Additionally, it should be noted that last week three Hindenburg Omens were triggered on the Nasdaq and two on the NYSE Composite (.NYA).
These clusters can highlight a particularly fractured market, vulnerable to instability.
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Terence Gabriel is a market analyst at Reuters. The opinions expressed are his
Our Standards: Thomson Reuters Trust Principles.