By Carlos Guillen
Equity markets are having a volatile trading session today as investors get a view of weaker than expected manufacturing and housing data, both of which can be blamed on, well, you know, the weather.
Manufacturing in the New York region made a rather steep reversal, but still remained in positive territory. According to the Federal Reserve Bank of New York, its general business conditions index February result landed at 4.5, lower than the Street's consensus estimate of 7.5, but sharply decreasing from the 12.5 reached in January. Given that readings greater than zero signal expansion, this month's result makes the thirteenth month of expansion in the region that covers New York, northern New Jersey, and southern Connecticut; however, expansion has been rather volatile. On a more positive note, the General Business Conditions index edged higher from 37.51 to 38.99, with the index for future new orders climbing six points to 45.31, and with the index for expected number of employees rising for a second month to 25.00 from 20.73.
Another bit of negative news today was that confidence within the homebuilder industry decreased well below economists' expectations, giving an indication that the improvements in the housing market may be coming to a halt. According to the National Association of Home Builders (NAHB), confidence decreased by 10 points to 46, landing below the Street's consensus estimate of 56, and representing the sharpest decline since monthly record-keeping began in 1985. We should note that readings below 50 indicate that more respondents said conditions were poor. Perhaps serving to assuage the decline in home builder confidence was that bad weather limited prospective buyer traffic and depressed sales. Snowstorms last week from the South to the Northeast helped reduce homebuyer traffic to its slowest pace since April. Purchases and sales expectations also took a turn for the worse, which does not bode well for gross domestic product growth during this first quarter of 2014. In fact, the group's measure of the six-month sales outlook decreased to 54 from 60. So, while the weather was to blame for the decline in home builder confidence, it should be noted that increasing borrowing costs may also be a factor; in fact, the average 30-year, fixed-rate mortgage was 4.28 percent in the week ended February 13, up from 3.35 percent in May last year.
In all, despite the early volatility in stock prices, the Dow Jones Industrial Average is well off its low of the session, and it is attempting to move into winning territory. The rest of this week we will be getting more bits of data from the housing market and from manufacturing in the Philly region.