US Economic Outlook Murky, Stock Market Sentiment Negative

US Economic Outlook Murky, Stock Market Sentiment Negative

$DIA, $SPY, $QQQ, $VXX

US home resales rose in January, marking a 6-month high, a sign that the US economy is still on firm ground despite slowing global growth and tightening financial markets.

Tuesday, the data show a rise in house prices in the year to December. But, the economic outlook was tempered by a dive in consumer confidence.

The National Association of Realtors (NAR) said existing home sales increased 0.4% to an annual rate of 5.47-M units, the highest level since July. January’s sales pace was also the 2nd highest since Y 2007.

Sales rose in the Northeast, despite a huge Snowstorm in late January. They were unchanged in the South and fell 4.1% in the West, likely reflecting tight inventories and higher prices.

The S&P/Case Shiller composite index of 20 Metro areas rose 5.7% in December on a Y-Y basis, with some of the biggest gains coming from cities in the West. Prices rose 0.8%in December from November on a seasonally adjusted basis.

The housing reports added to retail sales, industrial production and employment data in suggesting the economy regained some momentum after slowing to 0.07% in Q-4.

Economists raised their Q-4 GDP estimates by at least one-tenth of a percentage point to as high as a 2.4% annual pace after the existing home sales data.

Concerns of a recession and decline in Crude Oil (NYSEArca:USO) prices fueled the recent wave of selling on global stock markets, causing financial market conditions to tighten.

The sell-off hurt consumer sentiment this month, a 3rd report showed.

The Conference Board said its consumer confidence index fell to a 6-month low of 92.2 from a reading of 97.8 in January.

Stock prices fell on Wall Street fell, but shares in Toll Brothers Inc. (NYSE:TOL), the largest US luxury homebuilder, rose 3.6% after it reported a rise in Quarterly revenue.

Housing continues to be supported by a tightening labor market, which is starting to push up wage growth, boosting household formation.

1st-time buyers accounted for 32% of existing home sales in January, an increase from 28% in the same frame last year.

Though residential construction only accounts for a small portion of GDP, housing has a broader reach in the economy, which should help to sustain growth.

The number of unsold homes on the market rose 3.4% to 1.82-M units in January from December, but was down 2.2% from a year ago.

At January’s sales pace, it would take 4.0 months to clear the stock of houses on the market, up from 3.9 months in December, but down from 4.5 months in January 2015.

A 6-month supply is seen as a healthy balance between supply and demand.

Tuesday, US major stock market indexes finished at: DJIA -189.08 at 16431.44, NAS Comp -67.02 at 4503.52, S&P 500 -24.24 at 1921.19

Volume: trade was lighter then the recent average with about 900-M/shares exchanged on the NYSE

• Russell 2000: -10.8% YTD
• NAS Comp -10.1% YTD
• S&P 500 -6.0% YTD
• DJIA -5.7% YTD

Stay tuned…

Paul Ebeling

HeffX-LTN

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