Equites Mixed As Markets Weigh Fiscal Relief Against Virus…..
U.S. equities closed mixed in a day of choppy trading, as the markets considered persistent COVID-19 concerns against the agreement of the elusive fiscal relief package. Much of the early positive sentiment derived from the passage of the long-awaited fiscal relief and government spending package totaling over $2 trillion, was met by lingering uneasiness surrounding the new variant of coronavirus spreading across the U.K. Mixed economic reports contributed to the seemingly rudderless market environment, as this morning’s upbeat final read on Q3 GDP was met with a decline in consumer confidence and the first drop in existing home sales in six months. In equity news, Apple is reportedly targeting 2024 to produce a self-driving vehicle with its own breakthrough battery technology. Treasuries gained modest ground, putting pressure on yields, and the U.S. dollar was higher, while crude oil prices added to yesterday’s tumble and gold turned lower. Asia finished mostly lower amid the virus uneasiness, while Europe rebounded from yesterday’s widespread losses.
The Dow Jones Industrial Average lost 201 points (0.7%) to 30,016, the S&P 500 Index decreased 8 points (0.2%) at 3,687, and the Nasdaq Composite advanced 65 points (0.5%) to 12,808. In heavy volume, 909 million shares were traded on the NYSE and 5.6 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $0.95 to $47.02 per barrel and wholesale gasoline lost $0.02 to $1.34 per gallon. Elsewhere, the Bloomberg gold spot price fell $16.76 to $1,860.13 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.7% to 90.68.
Stocks were mixed despite the U.S. Congress handily passing a long-awaited, and long-delayed, fiscal relief and government spending package of over $2 trillion. Lawmakers attached $900 billion in coronavirus aid to a $1.4 trillion measure that funds the government through September 30.
Consumer confidence falls, housing data dips, GDP revised higher…..
The Conference Board’s Consumer Confidence Index declined more than expected to 88.6 from November’s downwardly revised 92.9 level, and versus the Bloomberg consensus estimate calling for an increase to 97.0. The softer-than-expected read came as the Present Situation Index portion of the survey fell noticeably, while the Expectations Index of business conditions for the next six months rose from the prior month’s downward revision. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—fell into negative territory, posting a reading of -0.2 following the 6.9 level posted in October.
Existing home sales fell 2.5% month-over-month (m/m) in November to an annual rate of 6.69 million units—the first decline in six months—mostly matching expectations of a decline to 6.70 million units from October’s modestly-revised 6.86 million rate. Existing home sales are up 25.8% y/y.
Of the four major regions, the Northeast, Midwest and South each experienced m/m declines, while the West was unchanged from the prior month. All regions saw gains year-over-year (y/y). Sales of single-family homes and purchases of condominiums and co-ops were down m/m, but up y/y. The median existing home price was up 14.6% from a year ago to $310,800, marking the 105th straight month of y/y gains as prices rose in every region. Unsold inventory came in at an all-time low of a 2.3-months pace at the current sales rate, down from 2.57-months in October and the 3.7-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.
National Association of Realtors Chief Economist Lawrence Yun said, “Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels,” adding, “Given the COVID-19 pandemic, it’s amazing that the housing sector is outperforming expectations. Circumstances are far from being back to the pre-pandemic normal,” he said. “However, the latest stimulus package and with the vaccine distribution underway, and a very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021.”
The final look (of three) at Q3 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 33.4%, above forecasts calling for it to remain at the 33.1% posted in the second release. Q2’s figure was unadjusted at a 31.4% plunge. Personal consumption was revised to a 41.0% increase for Q3, ahead of expectations to remain at 40.6%. Q2 consumption was unrevised at a 33.2% drop.
On inflation, the GDP Price Index was downwardly revised to a 3.5% rise from the prior 3.6% increase and where it was expected to remain, while the core PCE Index, which excludes food and energy, was also revised slightly lower to a 3.4% advance from the prior 3.5% gain, below forecasts for it to be unadjusted.
The Richmond Fed Manufacturing Activity Index surprised to the upside, moving further into expansion territory (a reading above zero) for this month. The index rose to 19 from November’s 15 level, and versus forecasts calling for the figure to decline to 11. Solid increases in new orders and order backlogs overcame a decline in shipments.
Treasuries were higher, as the yield on the 2-year note was little changed at 0.12%, while the yields on the 10-year note and 30-year bond slipped 2 bps to 0.92% and 1.65%, respectively.
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