Markets Add to Yesterday’s Solid Gains…..

U.S. equities were able to continue yesterday’s momentum in today’s session to finish higher amid a heat-up in Q2 earnings season. Netflix rose after topping earnings expectations and posting a smaller-than-expected drop in global streaming subscribers, while Baker Hughes fell after missing expectations on component shortages and supply chain inflation. The economic calendar focused on housing, with existing home sales falling more than expected, while mortgage applications dropped for a third-straight week. Treasuries were mixed and the yield curve inversion remained intact, while the U.S. dollar modestly rebounded from yesterday’s drop. Crude oil and gold prices traded lower. Europe finished lower amid the ensuing energy crisis in the region, with the European Union proposing a 15% cut in natural gas consumption, while markets in Asia were broadly higher in the wake of the rally in the U.S. yesterday.

The Dow Jones Industrial Average rose 48 points (0.2%) to 31,875, the S&P 500 Index increased 23 points (0.6%) to 3,960, and the Nasdaq Composite advanced 185 points (1.6%) to 11,898. In moderate volume, 4.1 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.86 to $99.88 per barrel. Elsewhere, the gold spot price was $15.50 lower at $1,695.20 per ounce, and the Dollar Index gained 0.4% to 107.06.

Existing home sales fall to a 2-year low, mortgage applications decline for third week…..

Existing home sales declined 5.4% month-over-month (m/m) in June to an annual rate of 5.12 million units—the lowest since June 2020—versus the Bloomberg consensus estimate of a 5.35 million rate, while May’s figure was unadjusted at 5.41 million units. Contract closings declined for the fifth-straight month as sales in the Midwest, South, and West all were lower m/m, while sales in the Northeast were unchanged. Compared to last year, sales were lower in all regions. Sales of single-family homes and purchases of condominiums and co-ops were both lower m/m and from the prior year.

The median existing home price was up 13.4% from a year ago to a record high $416,000 and is up for 124 straight months as prices grew in each region. Unsold inventory was at a 3.0-months pace at the current sales rate, up from the from the 2.5-months pace a year earlier. National Association of Realtors Chief Economist Lawrence Yun said, “Falling housing affordability continues to take a toll on potential home buyers, and both mortgage rates and home prices have risen too sharply in a short span of time.” Existing home sales account for a large majority of the home sales market and reflect contract closings instead of signings.

In other housing news, the MBA Mortgage Application Index decreased 6.3% last week, following the prior week’s decline of 1.7%. The index was down for a third-straight week as a 4.3% drop in the Refinance Index was met with a 7.3% fall for the Purchase Index. The decline came as the average 30-year mortgage rate rose 8 basis points (bps) to 5.82% rate, and is up 271 bps versus a year ago.

Treasuries were mixed, but the inversion of the 2-year and 10-year notes remains intact, with the markets grappling with an aggressive Fed to fight high inflation and what the ultimate impact will be on the economy. The yields on the 2-year and the 10-year Treasury notes gained 2 bps to 3.25% and 3.04%, respectively, while the 30-year bond rate ticked 1 bp lower to 3.16%.

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