Stocks are slowly drifting lower as investors digest mixed economic data this morning. The CPI came in a little bit higher than expected while new housing starts and building permits plunged in October. A decline in the U.S. dollar is fueling a little strength in some of the commodities but commodity-related stocks are not seeing any follow through higher. Crude oil is relatively flat around $79 a barrel. Gold futures hit a new all-time high at $1,151 an ounce this morning but have since pared their gains.
Asian markets were mixed. The Chinese Shanghai continues to march to the beat of its own drum with another gain (+0.6%) and another new three-month high. The Hong Kong Hang Seng is still struggling with resistance near the 23,000 level and closed with a 0.3% decline. The Japanese NIKKEI lost 0.5% and closed at six-week lows thanks to a rising yen and declining investor confidence.
European markets witnessed another day of profit taking after hitting new highs on Monday. Resource names were higher on the weaker dollar. The French CAC-40 closed virtually unchanged with a -0.02% decline. The German DAX gained +0.16%. The English FTSE sipped 0.07%. English candy maker Cadbury was in the news again as the company faces a potential bidding war from American companies Kraft, Hershey, and the Italian firm Ferreo; which are all considering a takeover bid for Cadbury.
Here in the U.S. the Labor Department said the Consumer Price Index (CPI), a measure of inflation at the consumer level, rose 0.3% in October. Economists were looking for a rise of 0.2%. The core CPI, which excludes the more volatile food and energy prices, gained 0.2% versus expectations for +0.1%. Meanwhile the Commerce Department announced that new housing starts and building permits fell unexpectedly in October. Economists were expecting a rise to 600,000 units for the housing starts number and a rise to 580,000 units for the building permits number. Actual housing starts plunged 10.6% to a seasonally adjusted rate of 529,000 homes compared to September's, which was revised higher to 592,000. Building permits fell about 4% to 552,000 in October. Year over year building permits are down more than 24% and housing starts are off more than 30%.
While the declines are worse than expected I wouldn't blame the homebuilders who were facing uncertainty over the new home buyer tax credit. The tax credit has been extended but during the month of October it looked like Congress was going to let it expire. Falling housing starts should be welcomed since the market currently has a glut of inventory. The DJUSHB home construction index is up 0.2% on the session.
Outside of the homebuilders the only sectors in positive territory are the drug stocks and the banking stocks. Overall the S&P 500 index is down less than five points and hovering near the 1105 area. The NASDAQ composite is off about 0.9% and dancing near prior resistance at 2180. The Dow Industrials are drifting sideways in a new short-term 10,350-10,440 trading range. The small cap Russell 2000 is off about 1% and currently falling back under resistance at the 600 level.
Let's take a quick look at charts for some of the major indices:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list for movement we see that Deere & Co (DE) is breaking out over major resistance at the $50.00 level. The stock has exceeded our trigger to buy calls and the play is now open. Meanwhile RIMM is sinking 3.2% and falling back under the $60.00 level due to some negative analyst comments.