August 2009 - MND NewsWire

Stocks have had a rough day in the final session of August. After a sell-off in China hurt investor sentiment in Europe, US equity markets opened lower and have failed to bounce halfway through the day. As of 1:30, the NASDAQ is off 1.39% to 2,000, followed by a 1.22% dip in the S&P 500 to 1,016, while the Dow trades 0.95% lower at 9,453.

Optimism that the economy is recovering in the third quarter has allowed the benchmark S&P 500 to rebound by 52% since early March, but in the past week markets were unimpressed with fresh data, even though most of it was positive. Analysts said investors were not sure the rapid 5-month gain in markets was justified, leading many to take profits while they could, pushing their cash from risky equities into bonds. A rally in Treasuries caused the 10-year yield to fall from 3.60% last Monday to 3.45% this morning.

Stocks are looking to continue the rally from yesterday afternoon, with equity futures pointing upwards between 0.2% and 0.4%. Data at 8:30 could change that, as the Personal Income & Outlays report is one of this week’s key releases. But expectations are that incomes rose slightly and consumption made its third straight gain. If so, markets should open higher when the opening bell sounds at 9:30. “Financial markets are welcoming more risk this Friday morning, with U.S. stock futures pointing higher, European bourses and most Asian equities rallying, and the USD and JPY slightly weaker,” said Jennifer Lee from BMO. “Buried beneath the green, though, was another worrying selloff in Chinese stocks.”

At 1:30 the S&P is 0.44% lower to 1,023, while the Dow is essentially flat, -0.01% to 9,542, and the NASDAQ is -0.87% to 2006. On the debt side of the market the Treasury Department has successfully auctioned $28 billion 7 year notes. Following the auction the rates market rallied a bit but quickly returned to pre-auction price levels. It has been a choppy day for stocks.

Markets spent most of the day in a slumber yesterday, but just before the closing bell a small rally lifted equity indexes to just above par. This morning, investors are holding the market flat, as GDP revisions are expected to show a downward revision in the second quarter, and jobless claims are expected to remain above the 550k level. Performance in the equities market has been tepid this week, in contrast to economic data that Deutsche Bank analysts call “notably upbeat.”

Data suggesting that the economy is experiencing a broad-based rebound continues to pile in this week, most recently in the housing market. New Home Sales advanced by 9.6% in July, hammering expectations for a 5% increase and following up on a 9.1% advance in the prior month. July marks the fourth consecutive monthly increase, pushing the annual pace of sales to 433,000 -- the first time same sales have passed the 400k mark since October. The annual rate is still 13.4% below the pace in July 2008, yet that compares nicely with the 19.1% annual decline reported in June. “This report was surprisingly strong, and helps to further the story that the U.S. housing market has now reached a stabilization point,” said Ian Pollick, strategist at TD Securities. He added that “housing conditions remain favorable due to low mortgage rates, deep discounts and a rosier economic outlook.”

Investor sentiment is cautious ahead of the Durable Goods release at 8:30 and the New Home Sales report at 10:00. Equity futures are looking slightly downward, with the S&P 500 down 3 points to 1,023, more than erasing yesterday’s modest 2.4-point gain. Both data reports are expected to bring good news. Before the two releases, the Mortgage Bankers Association said its Market Composite Index ― which tracks the volume of mortgage applications ― advanced 7.6% last week, a nice touch to the 5.6% gain in the week before. The gain occurred despite a minor rise in mortgage rates

The National Association of Home Builders has closed its office for the entire week in an effort to cut expenses. The organization will also take an extended holiday during the entire week of Thanksgiving according to a press release on its website.