Beyond the Numbers
Housing Data Holds Key for Market Movement
3/19/2012 9:13 AM
The major U.S. index futures are pointing a lower opening on Monday, with sentiment still weak despite an announcement from Apple (AAPL) concerning the initiation of a quarterly dividend and a $10 billion worth of stock buyback program. That said, commodities are holding up, reflecting the prevalence of moderate risk appetite. The trading direction of the day largely hinges on the results of a homebuilder confidence survey to be released shortly after the markets open. If the index holds around current levels or show a modest increase, the markets could weather the negative sentiment despite their overbought levels.
U.S. stocks advanced solidly in the week ended March 16th, as economic data continued to be encouraging. In the process, stocks braved the nervousness over overbought levels and closed higher for the week.
The major U.S. averages moved about in a listless manner last Monday amid growth and Eurozone debt worries before closing on a mixed note. Confidence returned on Tuesday, as traders reacted with verve to a positive U.S. retail sales report and the Federal Reserve’s upgraded assessment about global growth. The major averages closed up over 1 percent each, settling at fresh multi-year highs.
Amid a lack of any major catalysts and in the face of recent strong advances, stocks went about in a lackluster fashion on Wednesday before closing mixed. The averages stood their ground on Thursday on the solid support provided by the U.S. jobless claims report and manufacturing readings. The major averages nervously hugged the unchanged line for the better part of Friday’s session before closing mixed.
For the week, the Dow Industrials added 2.4 percent and the S&P 500 Index rose 2.43 percent, while the Nasdaq Composite ended up 2.24 percent.
Among the sector indexes, the KBW Bank Index rose 8.79 percent and the NYSE Arca Securities Broker/Dealer Index climbed 5.42 percent. Additionally, the Dow Jones Transportation Average and the Philadelphia Housing Sector Index rose over 3 percent each and the Philadelphia Semiconductor Index and the Dow Jones U.S. Basic Materials Average added over 2 percent each. Meanwhile, the NYSE Arca Gold Bugs Index slid 6.56 percent.Currency, Commodity Markets
Crude oil futures are rising $0.53 to $107.59 a barrel after edging down $0.34 to $107.06 a barrel in the week ended March 16th.
Last Monday, crude oil futures pulled back by over $1-a-barrel amid an increase in risk aversion. The commodity rebounded moderately on Tuesday in reaction to the Fed’s positive economic assessment.
Oil fell by over $1.25-a-barrel on Wednesday and added to its losses by a modest margin on Thursday. Crude oil came back strongly on Friday, benefiting from the dollar’s weakness. Additionally, the denial by the U.S. of any possible release from the strategic petroleum reserve in a bid to curb prices also proved bullish for the commodity.
Gold futures, which fell $55.70 or 3.26 percent to $1,655.80 an ounce in the previous week, are currently gaining $1 to $1,656.80 an ounce.
On the currency front, the U.S. dollar weakened modestly against the euro in the week ended March 16th, losing 0.33 percent before settling the week at $1.3175. The dollar received some beating from the U.S. consumer price inflation report released on Friday, which showed a tamer than expected increase in core consumer price inflation, which offered scope for normalizing interest rates. At the same time, the euro found strength due to the alleviation of Greek debt worries.
Meanwhile, the dollar gained 1.21 percent against the yen over the week before ending at 83.435.
The U.S. dollar is currently valued at 83.328 yen and is valued at $1.3157 versus the euro.Asia
The major Asian markets closed on a mixed note, as traders remained cautiously optimistic about the global economic recovery.
The fragile hopes wavered after a government report showed that average property prices in 70 Chinese cities fell for the fifth straight month.
Japan’s Nikkei 225 average advanced for the fifth straight session, although closing notably off the highs of the session. The key index closed up 12.16 points or 0.12 percent at 10,142, its highest level since March 11th, 2011, when Japan was hit by an earthquake. Financial and export stocks gained ground, while utility and resource stocks came under selling pressure.
Australia’s All Ordinaries hovered in positive territory throughout the session before closing up 16.50 points or 0.38 percent at 4,381. Most sectors, barring consumer staple and telecom stocks, advanced modestly to moderately. Meanwhile, Hong Kong’s Hang Seng Index ended at 21,115, down 202.56 points or 0.95 percent. Europe
European stocks are seeing weakness after settling at 8-month highs in the previous week. The French CAC 40 Index is receding 0.76 percent compared to a 0.77percent retreat by the German DAX Index, while the U.K.’s FTSE 100 Index is down 0.43 percent.
U.K.-based software firm Misys announced an agreement to be bought by private equity firm Vista Partners for 350 pence per share in cash after walking away from a deal with Temenos.
TNT Express finally secured a deal to be bought by its U.S. rival UPS (UPS) for a sweetened offer price of 9.50 euros per share in cash or 5.16 billion euros in total. U.S. Economic Reports
The housing market is on the radar in the unfolding week, as several key housing reports are scheduled to be released. Traders may closely track the National Association of Realtors’ existing home sales report for February, the Commerce Department’s new home sales and housing starts reports for February, the National Association of Home Builders’ housing market index for March and the Federal House Finance Agency’s housing market index for January.
The jobless claims report and a few Fed speeches due for the week may also garner some attention. The Conference Board’s leading indicators index for February and announcements concerning Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.
Housing starts may have seen a slight increase in February, as multi-family housing starts benefit from rental demand. Single-family starts are also seeing some degree of buoyancy. Even with the recent increases, housing starts are still way below their peak.
Similarly, existing home sales are also expected to see a modest increase, given the trend suggested by pending home sales and the recent increase in new purchase applications. The gains seen in existing home sales over the past six months have depleted some of the home inventories.
The National Association of Home Builders is scheduled to release the results of its March survey on homebuilders' confidence at 10 am ET. The consensus estimates call for the index to increase to 30.
The housing market index rose 4 points to 29 in February, marking the highest level since May 2007. The present conditions and future expectations indexes both rose 5 points and the index measuring prospective buyer traffic rose 1 point.Stocks in Focus
Apple announced plans to initiate a dividend and share repurchase program commencing later this year. The Company plans to initiate a quarterly dividend of $2.65 per share sometime in the fourth quarter of its fiscal 2012 and has authorized a $10 billion share repurchase program commencing in the Company’s fiscal 2013.
Adams Golf (ADGF) said it has agreed to be bought by Adidas for $10.80 per share in cash or $70 million in total.
Kensey Nash (KNY) said it has entered into a settlement agreement with St. Jude Medical (STJ) to resolve all disputes between the companies relating to the Angio-Seal vascular closure device license. The agreement calls for St. Jude to pay $39 million to Kensey Nash in 12 quarterly payments beginning March 31, 2012.
A Lockheed Martin (LMT)-led industry team has received a $715 million contract modification to add funding for the construction of 2 littoral combat ships. This represents the third and fourth in a 10-ship contract awarded in December 2010.
Pep Boys (PBY) announced that the ‘go-shop’ period set forth in its previously announced merger agreement entered into on January 29th this year has expired. The company now expects its acquisition by private equity firm Gores Group to be competed in the second quarter.
Domino’s Pizza (DPZ) said it has completed its recapitalization as planned with the placement by certain of its subsidiaries of a $1.675 billion securitized debt facility. The plan also includes the declaration of a $3 per share special dividend.