Wednesday, December 4, 2013
2:32 PMSluggish summer new home sales revised down further
- Higher interest rates took more of a bite out of home sales than originally thought, with today's New Home Sales release revising August sales 10% lower than previously reported, and June and July down 0.9% and 4.4%, respectively.
- September sales - which weren't reported last month due to the shutdown - of 354K units (seasonally adjusted) were off 6.6% from August's downwardly revised figure and 7.8% below a year earlier, the first time in nearly 2 years sales fell on a Y/Y basis.
- The October report may have made up for it all - 444K in sales is a whopping 25% higher than September. November's print should be especially noteworthy to see if the big October number gets revised lower, or if sales have truly rebounded from a sluggish summer and early fall.
- XHB -0.9%, ITB -0.8%.
2:06 PMBeige Book focuses on positive signals
- The economy continued to expand at a "moderate to modest" pace, according to the Fed's Beige Book report that's notably short on negative trends.
- Manufacturing continues to expand and managers are optimistic about the near-term. Retailers are positive about current activity (survey closed on Nov. 22) and "hopeful, but cautious" about the holiday season.
- A number of districts reported an easing in lending standards.
12:09 PMHigh yield running out of room to rally?
- "High yield simply fares better" in a rising rate environment, says JPMorgan's Peter Acciavatti, as his team sees junk bonds returning 5% in 2014 with default rates remaining below average. "It’s hard to get the market to back up substantially when default rates are as low as they are."
- Not necessarily telling investors to avoid high yield, Morgan Stanley's Adam Richmond nevertheless believes the 4-year junk rally has about run out of steam. "Absolute returns are going to be low by historical standards ... We’re looking at improving growth, low defaults and rates likely rising ... It’s not a terrible environment for high yield, but the issue really is the math.”
- Related ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, BSJF, SJB, BSJE, BSJD, ANGL, BSJI, BSJG, XOVR, UJB, QLTC, BSJH, SHYG, BSJJ, BSJK
8:25 AMBig ADP print sends 10-year yield up to 2.84%
- Bond prices tumble after November ADP jobs prints at 215K, beating expectations of 185K. Additionally, October is revised higher by 54K jobs to 130K.
- November's 215K gain is the highest since November 2012's 276K.
- Full report
- The 10-year yield is up 5 bps to 2.84%, and TLT -0.7%, TBT +1.5%.
- Stock index futures turn lower, the S&P 500 (SPY) -0.3%.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, TBX, TLO, VGSH, VGIT, GSY, LBND, DTYL, SCHR, TYD, SCHO, ITE, TENZ, TYBS, TUZ, FIVZ, DTUL, SST, DTUS, TBZ, DFVL, DLBL, DFVS, TYNS
- S&P 500 ETFs: SPY, IVE, SH, SSO, SDS, IVV, SPXU, UPRO, VOO, RSP, RWL, EPS, IVW, SPYG, RPG, SPYV, BXUB, RPV, VOOG, VOOV, TRND, SFLA, BXUC, FTA, BXDB
8:00 AMWilliams suggests Fed Funds rate lower for longer
- Concerned markets aren't getting the message the taper and end of QE does not mean the Fed is ready to boost the Fed Funds rate, San Francisco Fed chief John Williams says he would support revising FOMC guidance.
- "My view would be that we would not be raising the funds rate even if the unemployment rate was below 6.5%, as long as inflation continued to be low, for some time ... I would get our communication around this post-6.5%, the sooner the better."
- Williams will not be a voter on the FOMC until 2015 (he will be an alternate next year), but is seen as a close ally to incoming chair Janet Yellen.