Tax Reform and Housing Data are Unable to Fuel Stock Gains…..

U.S. stocks paused today, even as existing home sales jumped to a near an 11-year high and the tax reform bill has passed the final procedural hurdle. Treasury yields were mostly higher and the U.S. dollar is down. Crude oil prices are up following some bullish energy inventory data, and gold is higher. FedEx’s results and guidance are highlighting a busy earnings front. Europe was down.

The Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite were little changed today. The Dow lost 28 points, the S&P 500 dropped 2, and the NASDAQ was also lower by 2. WTI crude oil increased $0.39 tot $57.95 per barrel, Brent crude oil advanced $0.41 at $64.21 per barrel, and wholesale gasoline was up $0.03 at $1.73 per gallon. The Bloomberg gold spot price rose $5.41 to $1,267.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.2% to 93.29.

Existing-home sales in November jumped 5.6% month-over-month (m/m) to a 5.81 million annual rate—the highest since December 2006—compared to the Bloomberg forecast of a 5.53 million pace, and versus October’s upwardly revised 5.50 million rate. Sales of single-family homes grew 4.5% m/m and purchases of multi-family structures jumped 14.3% m/m, with both up y/y. The median existing-home price was 5.8% above year ago levels at $248,000. Unsold inventory came in at a 3.4-months pace at the current sales rate—a record low—down from last year’s 4.0 months rate. Inventory of homes for sale are down 9.7% y/y. Sales were solidly higher m/m in all regions except the West. Existing home sales are based on contract closings instead of signings and account for the majority of the housing sales market.

The National Association of Realtors (NAR) noted that faster economic growth, the booming stock market and continuous job gains are fueling substantial demand for buying a home as 2017 comes to an end. However, affordability continues to be pressured by scarce supply and elevated prices, with first-time buyers contributing to 29% of November sales, down from 32% in October and last year.

Treasuries were mostly lower, with the yield on the 2-year note flat at 1.85%, while the yield on the 10-year note was 2 bps higher at 2.49% and the 30-year bond rate advanced 5 bps to 2.88%. The Treasury yield curve continues to steepen, while the U.S. dollar has extended weakness as of late and the stock markets have pared back from recent record high territory. The House and Senate voted in favor of the Tax Cuts and Jobs Act, delivering the most sweeping tax overhaul in decades.

Schwab Center for Financial Research – Market Analysis Group

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