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By Carlos Guillen

Despite the ups and downs resulting from the massive number of financial reports posted last week, markets responded very well and finished the weekly session up, with the Dow Jones Industrial Average gaining 1.13 percent from the preceding week. And this week is starting off very encouragingly as well, with good housing data coupled with fairly decent increases in income and consumer spending.

Perhaps giving equity markets a nice lift today, the National Association of Realtors delivered its Pending Home Sales Index, which gave support for a slow but continuing improvement in the housing market. The number of prospective homeowners signing contracts to buy previously owned properties rose month-over-month by 1.5 percent, an increase larger than economists' expected, to the highest level in three years. With affordability high and job creation slowly improving, there is still good opportunity for improvement in the housing sector; more on this below.

On other economic news, according to the Bureau of Economic Analysis, personal income during March increased month-over-month by 0.2 percent, worse than the Street's consensus estimate calling for a 0.3 percent month-over-month rise. Concurrently, personal consumption expenditures (PCE) increased by 0.2 percent, while economists' average forecast called for a 0.1 percent rise. As a result of incomes growing at the same rate as expenditures, the savings rate remained flat at 2.7 percent. The price index for PCE decreased 0.1 percent in March, in contrast to an increase of 0.4 percent in February. This is sure to give the Fed more reasons to maintain its quantitative easing policy intact when they meet this Tuesday.

In all, stocks are reacting much more strongly than we would have expected given the data presented today. While the housing data released today was good, a bird's eye view of all the housing data presented this year is still rather mixed. Moreover, the personal income data today was mostly the same as it was last week when GDP numbers were presented. Nonetheless, it is very encouraging to see that investors are ready to jump into stocks at the sight of any bits of good economic data points.

Pending Home Sales
By David Urani

March pending home sales were up 1.5% month to month, while being up 7.0% year over year. That was a tad higher than the expectation of a 0.7% increase. In a way the results support some other evidence of relative stagnancy in home sales, being flattish so far this year. That being said the non-seasonally adjusted sales data, as we also saw with the new home sales release, showed a healthy kick-off to the spring selling season with sales up 28.8% month to month. Consequentially I think it's important to keep an eye on inventories.

We've noted months' supply of home inventories remaining very light in recent months, and with the big seasonal influx of home demand kicking in we may see an increasingly tight supply. In fact, the NAR noted once again in the release that flattening in the sales data could be attributable to short supply. That seems to be especially true in the West where sales were down 4% year over year, seasonally adjusted.

Subsequently we continue to see an environment that's favorable to home builders, who are working to churn out adequate supply that the market needs. And with respect to short supply, it may also continue to support rising prices. That being said, for builders who aren't well equipped with resources and capital it can still be tough out there to obtain the necessary credit and/or land to build lots.