Intraday Market Update
After gapping higher at the open by +10 points and trading up to 1,148, the S&P 500 quickly sold off by more than -23 points reaching a low around 1,125. All of the indexes are near their lowest levels of the day in mid-day trading. Leading the declines are the large cap techs which are off by about -1.25%.
Housing starts in the US rose to an annual rate of 672,000 units in April which is the highest level since October 2008, topping analyst's forecasts for a rise to 650,000 units. This is a gain of +5.8% in April which follows a +5% gain in March. April gains were led by a +10.2% increase in single-family starts, following a +2.1% rise in March. However, the multi-family component fell -18.6% after surging +24.4% in March. The recent spike in home sales has definitely boosted new construction, but according to permits builders remain cautious about a likely dip in sales now that government tax credits for homebuyers have expired. Housing permits, which are leading indicator for homebuilding, declined -11.5% in April following a +5.4% boost in March. April's decline was the most since December 2008, however, the April pace of 606,000 permits was up +15.9% on a year over year basis.
In the Producer Price Index report overall PPI inflation was down slightly to -0.1% after a +0.7% spike in March. The decline was below analyst's estimates for a rise of +0.1%. Declines in energy and food prices helped pull the headline number down. Core PPI registered a +0.2% rise which followed a +0.1% rise in March. Core PPI remains very subdued at these levels and there is no signs of inflation. Add in the fact that the European austerity measures will likely keep economic growth in check and continue to put pressure on lower commodity prices, indicates that the Federal Reserve is likely to keep benchmark interest rates near zero. The question now is whether they will have to deal with a deflationary global economy which is not what the Fed wants.
In earnings news, Wal-Mart beat estimates but offered a weak Q2 estimate of 93 to 98 cents per share. Analysts were expecting a forecast of 98 cents per share. Shares of WMT are up +3%. Home Depot also beat estimates and boosted its forecast for the year after seeing strong demand for gardening products and energy efficient appliances. Shares of HD are off by -2% probably because executives warned that they are seeing no positive comp growth from the construction industry.
Abercrombie & Fitch posted a narrower quarterly loss than estimates as the teen retailer was helped by a double digit sales increase and lower store occupancy costs. Shares of ANF jumped +2% on the news but have since plunged and are down -4%. High-end retailer Saks surged almost +7% in early trading after beating expectations and maintaining forward looking forecasts, but shares are now -2% lower on the day. TJX Companies is down almost -4% after offering weak guidance.
Commodities are mixed with copper gaining +3% after retreating -6% yesterday. Front month crude is about break-even, gold is down -1.35% to 1,211 per ounce, and silver is about break-even. Natural gas off by -0.80%.
Most major markets throughout the world were higher on Monday. Notable gainers in the Asia-Pacific region were China (+1.36%) and Hong Kong (+1.17%). Japan and Australia were relatively flat. All major European markets gained led by Spain (+3.68%), France (+2.08%), Germany (+1.47%), and London (+0.85%).
Core Sector List:
Overall reading: All 15 sectors declining, 1 sectors advancing.
Weakest Sectors: Banks, Semiconductors, Retail
Strongest Sectors: Home Construction, Oil
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