Intraday Market Update
US Equities are back to their weekly highs after gapping nearly +1% higher at the open this morning. The bulls took control in the pre-market after this month's durable goods report included upward revisions to the previous month, and after stripping out the volatile transportation component, showed broad based strength. A disappointing new home sales report after the bell was essentially ignored as the upward momentum was clear out of the gate. On Tuesday afternoon, the S&P 500 printed a high of 1,148 and it was downhill from there as the index closed at 1,122 yesterday. The entire -26 point drop was erased in the first hour of trading this morning. All of the indexes are posting solid gains of pushing +2%. The close today will be important to see if equities can continue this rally, whether it will be faded. Gold keeps motoring higher and briefly traded over $1,300 per ounce for the first time ever. Front month crude has gained nearly +2%, while copper is surging towards its 52-week highs from April 12th. Overseas, the Asia-Pacific region was mostly higher with the exception of the Nikkei Index which lost -0.99%. European markets surged +1% to +2% higher on the back of the favorable durable goods data in the US.
Today's headline number for durable goods looked disappointing on the surface, but excluding the volatile transportation component the report showed broad based strength. Ex-transportation, new orders gained +2.0% which follows a +2.8% drop in July. New factory orders in August dipped -1.3%, following a +0.7% rebound in July, which was upwardly revised from a +0.4% increase. However, the reversal in overall orders in August was led down by the transportation component which dropped -10.3%, following a +11.6% gain in July. On a year over year comparison, overall new orders for durable goods in August 2010 improved to +11.2% from +9.7% in July. Excluding transportation, y/y August 2010 new orders came in at +12.9% compared to +10.6% in July. The good news in this durable goods report shows manufacturing is gaining strength outside of transportation.
After a string of favorable housing reports in recent days new home sales in August came in relatively flat at 288,000 units. There were minor revisions to prior months but the bottom line is that July and August new home sales remain near all-time lows. August's sales register as the second lowest reading on record as they are still hung-over from the expiration of the second-round housing stimulus party that pulled sales forward into the spring. Prices also continue to suffer as the median price of a new home fell another -0.6% to $204,700 which is a new 7-year low. The heavy supply of new homes on the market is a big negative for the whole economic outlook but many analysts believe the housing market is in the process of forming a bottom, so the depressed housing data tends to be ignored, for now.
In equities, today's rally is broad and deep as all sectors are posting solid gains with the exception of the gold miners which are only slightly negative. On the core sector list, 13 out of 20 are posting +2% or greater gains. All 30 DJIA components opened higher. Nike (NKE) is up 4.0% and at all-time highs after beating earnings estimates. On the conference call executives warned that commodity costs would pressure margins moving forward.
Keep an eye on today's close as it will be an important measure to gauge next week's trading.
Core Sector List:
Overall reading: 19 sectors advancing, 1 sectors declining
Strongest Sectors: Semiconductors, Insurance, Home Construction
Weakest Sectors: Gold Miners
S&P 500 - Daily and Hourly Charts:
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