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Home Construction and Gold sectors buck broader market trend

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The Dow Jones Home Construction Index (DJUSHB) 386.7 +2% and the Gold/Silver Index (XAU.X) 73.22 +2.4% are bucking today's broader-market negativity despite some mixed economic data that was released at 10:00 AM EST.

Home builders and stocks in that sector are getting a boost after this morning's construction spending data for May, which declined -0.7%, after a revised higher 0.4% gain in April. Homebuilders are getting a boost as non-residential construction fell by about 3%, while residential building was unchanged. Public spending on construction remained robust in the latest month, increasing by about 2%.

The manufacturing sector grew in June for a fifth straight month, following 18 months of declines. The Institute for Supply Management (ISM) said its ISM index rose to 56.2% from 55.7% in May, the highest reading since February 2000.

New orders fell back to 60.8% from 63.1%, while the production component rose to 61.4% from 58.5 % in May, the highest since June 1999.

The employment component nearly reached the 50% level that would indicate hiring in the sector, rising to 49.7% from 47.3%. Economists say that this data may bode well for this Friday's release of non-farm payrolls and jobless data reports.

Readings in the above ISM data over 50% indicate growth or increases in activity.

Manufacturers noted that the weakening U.S. dollar was opening up export markets as export orders rose to 54.5% from 53.3%. Steel products were the only commodities in short supply. The ISM said, "The tariffs are moving prices higher and extending deliveries in the industry."

Gold stocks are seeing some rebound after last week's decline after the ISM data showed that the prices component of the ISM survey rose to 65.5%, or roughly 2.5% higher than May's 63%. In June, 40% of supply executives reported paying higher prices and 7% reported paying lower prices, while 53% reported prices were unchanged from the preceding month.

Subscriber's wanting a more detailed review of today's ISM data, they can visit http://reportonbusiness.ism.ws/ROB072002.htm for a more detailed review.

While the Dow Industrials (INDU) 9,218 -0.26% did try and hold gains earlier today, the NASDAQ Composite (COMPX) 1,429 -2.3% never really put up much a fight after opening lower.

The Biotech Index (BTK.X) 331 -4.9% and Internets as depicted by the CBOE Internet Index (INX.X) 69.47 -4% continue to outpace broader technology on the downside.

Breadth is negative as we approach the final two hours of today's trading session with decliners outnumbering advancers by a 3 to 2 margin on the New York Stock Exchange, and breadth is further negative on the NASDAQ Composite with declines handily outpacing advancers by a 2 to 1 margin.

Jeff Bailey
Senior Market Technician
Option Investor

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