The market rally paused on Wednesday as investors digested the latest round of news coming from Europe and economic data in the U.S. New home sales continue to slip while durable goods came in better than expected. Across the Atlantic traders were spooked by a credit downgrade for the country of Portugal. This sent the euro currency to a new 10-month low against the dollar. The dollar's rally today is dragging commodities lower. Crude oil is down 1.4% to $80.72 a barrel. Gold futures are off about $12.50 to $1,091 an ounce.
Foreign markets were mixed again. It was a quiet low-volume day in Asia. The Hong Kong Hang Seng rose +0.1%. The Chinese Shanghai gained +0.12%. The Japanese NIKKEI rallied +0.38%. Stocks in Europe were retreating. News that German business sentiment had risen to its highest levels in over a year was not enough to offset growing concerns about Greece and Portugal. Investors are worried that if they don't solve the Greece debt problem now it will spark a domino effect as Spain, Portugal, Italy and Ireland struggle with their own rising debt levels. Fitch Ratings Agency downgraded Portugal's credit from AA to AA-.
EU leaders are still bickering over how to help Greece. Germany doesn't want to use any of their taxpayer funds to bail out anyone. Yet if the EU can't solve Greece's debt challenges it throws the security of the whole region into doubt. EU finance ministers are holding a two-day meeting starting tomorrow on how to help Greece and discuss how to strengthen the eurozone. The French CAC-40 lost 0.59%. The German DAX slipped 0.14%. The English FTSE closed down 0.12%.
In the U.S. the Commerce Department said new home sales fell to their lowest levels on record dating back to 1963. The home-buyer tax credit, extended by the federal government, does not seem to be having much affect. Economists were expecting home sales to rise to a 320,000 unit annual pace. Unfortunately sales fell 2.2% to a 308,000 pace, down from January's 315,000. You could just blame the winter storms that affected so much of the nation in February but new homes are also competing with a flood of foreclosures on the market. Elsewhere in the residential real estate market the Mortgage Bankers Association said U.S. mortgage applications fell for the second week in a row. Many analysts are pondering what will happen after next week when the Federal Reserve ends its purchases of mortgage-related securities, which have kept mortgage rates artificially low.
On a more positive note manufacturing data continues to improve. Durable goods orders, for items expected to last three year or longer, came at +0.5% in February. Economists were expecting +0.7% growth but it was still the third month of gains. If you exclude the more volatile transportation numbers then durable goods orders rose +0.9% in February, which was better than the +0.6% estimate. January's number was revised from +2.6% growth to +3.9%.
In corporate news Starbucks (SBUX) announced they will begin paying a cash dividend. The Board of Directors announced their first ever dividend and approved an increase in their stock buyback program. The old buyback program was down to 6.3 million shares and SBUX just boosted it by another 15 million shares. This is a show of confidence by SBUX management to return a little money back to shareholders. The 10-cent dividend will be paid on April 23rd to shareholders of record on April 7th.
Currently the major indices are off their worst levels of the session but they're still in negative territory. A little profit taking would be normal since stocks are so overbought. Generally speaking the market is seeing a widespread decline but most of the selling seems to be minor. That's not true for the metal and mining stocks. The XAU gold and silver index is off 2.95% and the GDX gold miner ETF is down 3.4%. The worst performers seem to be railroads (-1.0%), semiconductors (-1.4%), and retailers (-1.2%). The best performers today are homebuilders (+1.5%), gambling (+1.0%), and the BKX banking index is up +0.2%.
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