Housing permit data disappoints the street renewing concerns that the lagging real estate market will weigh on the economy. Inflation is still hiding as the PPI data falls more than expected. Strong earnings reports from AAPL, CAT, PFE, TXN and UNH were not enough to push the S&P 500 over resistance at the 1,100 mark. Meanwhile a bounce in the U.S. dollar is dragging down commodities, which has sparked profit taking for miners, materials and energy stocks.
Asian markets continued to rally after breaking out to new highs yesterday. The NIKKEI rose 0.98% led by technology stocks. The Hong Kong Hang Seng index rallied 0.8% confirming its breakout over the 22,000 level. The Shanghai index climbed 1.5% one day after breaking through the 3,000 level.
European markets suffered some profit taking with banks leading the way lower. News that Qatar's sovereign wealth fund, the Qatari Investment Authority, planned to sell more than 379 million shares (about $2.1 billion worth) of Barclays weighed on the financials. The English FTSE index lost 0.72%. The German DAX gave up 0.7%. The French CAC-40 lost 0.5%. European markets had hit one-year highs on Monday.
Housing permits were a big story today. Applications for housing permits, a measure of future construction, dropped 1.2% in September. This was the biggest drop since April 2009. At the same time the builder confidence index from the National Association of Home Builders ticked lower from 19 in September to 18 in October. Both declines were blamed on the expiring new-home buyer tax credit, which ends November 1st. While permits are down actual construction was up. The Commerce Department said construction of homes and apartments rose 0.5% to a seasonally adjusted pace of 590,000 units. Economists were expecting a rise to 610,000. The DJUSHB home construction index is down 2% on the session.
Inflation is still hibernating. The Labor Department said that the Producer Price Index dropped 0.6% in September. The core inflation rate, which excludes food and energy, fell 0.1%. The biggest influence was a 22% plunge in energy prices from a year ago. Overall this is a benign report and takes some pressure off the Federal Reserve to raise rates any time soon.
The U.S. dollar was making headlines with a decent bounce from 14-month lows but the trend is still very much down for the dollar. Crude oil is off about 1% near $78.75 a barrel. Gold is down less than $1 to $1,058 an ounce. Yet mining stocks are being sold with the XAU off 2.1%. The OIX oil index is down 0.8% while the OSX oil services index is down 1.8%.
Currently the S&P 500 index is off about 0.7% around 1089. The Dow Jones Industrial Average is off about 0.7% at 10,022. The NASDAQ composite is off about 0.7% at 2161. The small cap Russell 2000 index is the worst performer with a 1.4% decline. Technical traders will probably note that we're starting to see more bearish divergences among the major averages.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick scan of the OptionInvestor.com play list reveals that stocks aren't moving much. I'm seeing a lot of bounces from the intraday low this morning but most of our candidates are still seeing declines.