December 12, 2017

Markets Tumble on Wal-Mart Earnings and Fed Uncertainty

Stocks on Wall Street fell the most since late June on Thursday in the wake of disappointing results from Wal-Mart and Cisco, and sturdy economic data that may set the stage for the Federal Reserve to scale back its stimulus soon.

In afternoon trading the Standard Poor’s 500-stock index was down 1.6 percent, the Dow Jones industrial average lost 1.4 percent and the Nasdaq composite fell 1.8 percent.

New claims for jobless benefits fell to near a six-year low last week, and consumer prices rose broadly in July, two reports that could draw the Fed closer to trimming its $85 billion monthly bond-buying program.

The Fed’s stimulus measures have kept interest rates low and buoyed equity markets this year, but on Thursday, United States Treasury yields hit two-year highs. Higher rates raise borrowing costs for consumers and companies and reduce the attractiveness of equities relative to higher-yielding bonds.

“The speed at which bond yields have increased has caught investors off-guard,” said Dan Greenhaus, chief global strategist at BTIG in New York.

Wal-Mart shares fell 2.3 percent after the discount retailer posted disappointing same-store sales and missed revenue estimates for a fifth consecutive quarter. The company also lowered its revenue and profit forecasts for the year.

“The Wal-Mart earnings report is as big a macro indicator as” gross domestic product data, said Nicholas Colas, chief market strategist at ConvergEx Group in New York.

It shows that consumer spending “isn’t that strong yet — inflation is rising, wages are not, unemployment is still pretty high and that’s not a recipe for a strong retail environment,” he said.

Trading volume was low, as it tends to be in August, and will likely remain lackluster as earnings season winds down.

The technology sector was the biggest laggard on the S. P. 500, weighed down heavily by Cisco Systems, which fell 6.9 percent as a slew of brokerages cut their price targets on the stock. The network equipment maker said recently it will cut 4,000 jobs, or 5 percent of its work force.

One of the few bright spots in retail earnings was Kohl’s, which reported a rise in quarterly same-store sales, sending its stock up 5 percent.

European markets closed lower, with the FTSE 100 index off 1.6 percent. Asian markets ended the trading day mixed, weakened by Mr. Bullard’s comments; Japan’s Nikkei was 1.3 percent higher, while China’s Shanghai composite lost 0.3 percent.

In commodity markets, supply worries linked to the growing violence in Egypt and the brighter global growth outlook pushed oil prices higher and kept copper near a nine-week high.

A state of emergency was declared by the Egyptian government on Wednesday after deadly clashes between riot police and supporters of ousted President Mohamed Morsi. Investors fear the political turmoil could choke off traffic in the Suez Canal or spill over into big oil-producing nations.

“Egypt may not be a major oil producer but the Suez Canal is an important gateway, not just for oil flows but also for commodities,” said Carl Larry, president of the consultancy Oil Outlook and Opinions, based in Houston. “If there is any disruption or if the violence results in the shutting down of the canal, the impact will be quite severe.”

Benchmark crude in New York rose 60 cents a barrel, to $107.45.

Gold was off 0.3 percent, at 1,330.10 an ounce.

Article source: http://www.nytimes.com/2013/08/16/business/daily-stock-market-activity.html?partner=rss&emc=rss

Home Sales Slip

WASHINGTON — U.S. sales of previously occupied homes slipped in June to a seasonally adjusted annual rate of 5.08 million but remain near a 3½-year high.

The National Association of Realtors said Monday that sales fell 1.2 percent last month from an annual rate of 5.14 million in May. The NAR revised down May’s sales, but they were still the highest since November 2009.

Despite last month’s dip, home sales have surged 15.2 percent from a year ago. Sales have recovered since early last year, buoyed by job gains and low mortgage rates.

Still, mortgage rates have surged in recent weeks over concern that the Federal Reserve could slow its bond-buying programs later this year. The Fed’s bond purchases have helped keep long-term mortgage and other rates low.

Higher mortgage rates slowed sales last month of higher-priced homes in states such as California and New York, the Realtors group said.

The average rate on a 30-year fixed mortgage leapt to 4.46 percent by the end of June from 3.81 percent at the end of May. The rate was 4.37 percent last week.

That rate increase could hamper sales in coming months, economists said. But most expect housing to continue to recover, though at a slower pace.

“There’s little doubt the housing market slowed in the summer as mortgage rates rose,” Dan Greenhaus, chief global strategist at BTIG LLC, an institutional brokerage, said in a note to clients. “Housing is still expected to grow and contribute to economic output. It just may not be at the pace we’ve seen of late.”

Sales of previously occupied homes in June reflect contracts that were mostly signed in April and May, when mortgage rates were lower. Rising rates can cause some signed contracts to fall through if buyers no longer qualify for mortgages at higher rates.

The one factor that’s likely most holding back sales is a limited supply of homes available. Though more sellers put their homes on the market in June, the supply remained unusually low — nearly 8 percent less than a year ago.

At the current sales pace, the number of homes for sale would be exhausted in 5.2 months. That’s below the six months’ supply that’s consistent with a healthy housing market.

Another concern is that first-time buyers, who usually drive healthy markets, aren’t participating as much in the current recovery. They made up only 29 percent of buyers in June, below the 40 percent that is typical. Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. That’s made it harder for first-time buyers to qualify for mortgages.

Still, mortgage rates remain relatively low and home prices remain affordable despite rising in the past year. And higher mortgage rates could encourage some potential buyers to come off the sidelines and purchase homes before rates rise further.

The strength in housing this year has offset weaknesses elsewhere in the economy, like manufacturing and business investment. Rising home sales tend to lead to more spending at furniture and home supply stores.

Homebuilders have also stepped up construction in the past year, creating more construction jobs. In June, they applied for permits to build single-family homes at the fastest pace in five years.

Article source: http://www.nytimes.com/aponline/2013/07/22/us/politics/ap-us-home-sales.html?partner=rss&emc=rss

Stocks and Bonds: Strong Retail Sales Numbers Push Shares Higher

Analysts also said that fear about Europe’s debt crisis had faded somewhat in the last few days.

Both the Dow Jones industrial average and the Nasdaq composite index are higher than they were at the end of 2010. But the broader Standard Poor’s 500-stock index was still in negative territory, down 2.63 percent for the year.

On Friday , the S. P. 500 rose 20.92 points, or 1.74 percent, to 1,224.58; it gained 5.98 percent for the week. The Dow Jones industrials gained 166.36 points, or 1.45 percent, to 11,644.49, and the Nasdaq rose 47.61 points, or 1.82 percent, to 2,667.85. The weekly gains on the Dow and the Nasdaq were 4.88 percent and 7.6 percent, respectively.

Interest rates continued to rise. The yield on a 10-year Treasury note rose to 2.25 percent, from 2.18 percent late Thursday.

Analysts said the retail sales numbers had beaten expectations. Sales rose 1.1 percent in September from August, and 7.9 percent from the previous year — the fastest clip since February, according to the Commerce Department. The rate of growth between July and August was also revised upward to 0.3 percent, after having been initially reported as flat. Total retail sales were $395.5 billion.

Every category of retailers reported higher sales from a year ago except for electronics and appliance stores, whose sales remained flat. Automobiles were particularly strong, with sales rising 3.6 percent from August, and 8.5 percent from September 2010.

The report was another sign that the economy may be in better shape than many economists thought, said Dan Greenhaus, the chief global strategist at BTIG. The recent rise in stock prices reflects the change in the prevailing outlook, he added.

“When the stock market collapsed, you were uncool if you were weren’t saying that the U.S. was going into recession,” he said.

In a surprise, however, preliminary figures for the Reuters/University of Michigan consumer sentiment index showed a drop to 57.5 for October from 59.4 in September. Analysts expected confidence to rise. Instead, sentiment in every category dropped.

Consumer sentiment has been hovering near the levels reached during the recent recession, which economists take as a troubling sign that the perception of a weak economy could end up becoming a self-fulfilling prophecy.

But Russell Price, a senior economist at Ameriprise Financial, said that attitudes could get out of line with how people were actually acting during turning points in the economy. “If people are confident enough to go out and spend $30,000 on a new automobile, it shows they are pretty confident in their own financial situation,” he said.

European markets were also higher Friday, as the Group of 20 finance ministers began a two-day meeting to discuss their approach to the European debt crisis. The benchmark Euro Stoxx 50 was up 1.2 percent. The FTSE 100 in London gained 1.17 percent, while the DAX in Frankfurt rose 0.89 percent.

Optimism about a European rescue plan also continued to push up the price of the euro against the dollar. The euro traded at $1.3876, up 0.92 percent.

The urgency of the G-20 talks was underlined when the Fitch Ratings agency said Friday that it would review its ratings for some of Europe’s most globally interconnected banks. This week the European Commission proposed requiring the Continent’s largest banks to bolster their protection against losses. There has also been discussion of the International Monetary Fund helping to increase the power of Europe’s rescue plan.

The euro zone is entering a critical countdown, with investors in financial markets expecting European officials at a summit meeting on Oct. 23 and leaders of the Group of 20 on Nov. 3 to endorse specific plans to confront the crisis. For now at least, investors have taken heart at perceived progress in Europe. The VIX, which measures volatility in the market, has dropped to its lowest levels since it spiked on Aug. 4. Popularly known as the fear index, the VIX ended at 28.24, down from a peak of over 45 in early October.

Analysts stressed the fragility of investors’ confidence, and some voiced concern that optimism about the prospect of a plan could fade when its specifics were hammered out.

“We’ve been here before,” said Nariman Behravesh of IHS Global Insight. “It’s pretty tenuous right now.”

Article source: http://feeds.nytimes.com/click.phdo?i=23035c0dfc8ce488843d7ff1a6877eb8