- Major U.S. stock indexes green; Nasdaq up most
- Tech biggest S&P sector gainer; financials down most
- STOXX up ~0.7%
- Dollar, crude gain; gold, bitcoin slip
- U.S. 10-year Treasury yield ~1.52%
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HOMES FOR THE HOLIDAYS: PENDING HOME SALES JUMP TO 10-MONTH HIGH (1105 ET/1605 GMT)
Housing market data released on Monday supported the notion that the sector, despite slowing down under the weight of its own success, still has some gas in the tank.
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Pending sales of pre-owned U.S. homes (USNCH=ECI) surged by 7.5% last month, blasting past consensus and posting a decisive rebound from September’s 2.4% decline, according to the National Association of Realtors (NAR). read more
The increase sent the index to its highest print in ten months, where it hovers well above pre-COVID levels.
“This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low,” writes Lawrence Yun, NAR’s chief economist.
Indeed, while the initial threats – and resulting lockdowns – surrounding the pandemic have waned, its effects don’t appear to be going away any time soon, as evidenced the new Omicron variant. read more
As a result, demand for elbow room and home office space remains robust, with many potential buyers finding additional impetus in the form of rising rents and interest rates.
“Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later,” Yun added.
The initial suburban flight drove inventories to record lows, even as homebuilders struggled replenish those inventories as they wrestled with land scarcity and a hobbled supply chain.
These factors launched home prices into the stratosphere, and beyond the grasp of many potential buyers, particularly and the lower end of the market.
But as Rubeela Farooqi, chief U.S. economist at High Frequency Economics points out, inventories and home prices have both shown recent signs of easing.
“Inventories, while they have declined over the last three months, have moved up from lows earlier this year,” Farooqi says. “Gradually easing supply constraints should be a positive for existing home sales over time.”
As a potential home sale is counted as ‘pending’ once the contract is signed, the data acts as a fairly accurate predictor of actual home sales a month or two down the line.
So, much like the Commerce Department’s building permits report, which also showed a nice rebound in October, pending home sales is among the sector’s most forward-looking indicators.
But the stock market is the most forward-looking indicator of them all, reflecting where investors believe the housing sector will be six months to a year down the road.
But as shown in the graphic below, index performance rebased to a year ago shows that relationship has since converged, although the SPCOMHOME has gained an edge of late, nicely echoing the recent uptick in the NAHB’s Homebuilder Sentiment index.
Wall Street was heading sharply higher before the data hit, rebounding from Friday’s steep sell-off due to renewed pandemic fears in the form of our newest addition to the common vocabulary ‘Omicron.’
But the perennial stay-at-home plays, namely market leading tech megacaps, have since taken a decisive lead, pushing the Nasdaq to the head of the pack.
RECOVERING FROM OMICRON? GIVE MARKETS 10 DAYS! (0959 ET/1559 GMT)
Even though markets have quickly switched from panic selling to dip-buying, main equity benchmarks remain well below the levels they were at before Omicron jitters wiped $2 trillion off stock markets worldwide.
At this point one may wonder how long could it possibly take for a complete recovery?
To answer that, Mediobanca looked at market behaviour in October last year when the Delta variant was first spotted.
Back then, it took 10 days to rebound and reach new highs, it says, which suggests that this time around the recovery process should be faster, given that the number of vaccinated is much higher and the time to market of new shots is shorter.
“We might be back to highs quite soon,” the Italian investment bank wrote in an email to clients.
U.S. FUTURES BOUNCING AFTER OMICRON SELL-OFF (0815 ET/1315 GMT)
U.S. equity index futures were pointing towards a higher open on Monday, after Friday’s sharp sell-off in a shortened post-Thanksgiving holiday session fueled by the finding of a new coronavirus mutation in South Africa.
A top South African infectious disease expert said on Monday that existing COVID-19 vaccines should be highly effective at preventing severe disease and hospitalization from the new variant, named Omicron, and U.S. President Joe Biden was due to update the public on the new variant and the U.S. response later in the day. read more
The Dow Industrials (.DJI) suffered its biggest one-day percentage decline since October 2020 and the S&P 500 (.SPX) saw its biggest daily percentage drop since February 25 on Friday, as concerns about the new variant rattled markets, although many analysts said the selling was likely exacerbated by the light volume trading session.
After slumping about $10 a barrel on Friday, oil prices were rebounding by about 5% while travel-related stocks such as American Airlines (AAL.O) and Norwegian Cruise Line (NCLH.N) also gained ground after tumbling on Friday.
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FOR MONDAY’S LIVE MARKETS’ POSTS PRIOR TO 0830 EST/1330 GMT – CLICK HERE: read more
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