The economic data released this morning was better than expected, especially in the housing sector. Pending home sales for June rose +3.6%, which handily exceeded expectations for a 0.7% increase. Moreover, this was the 5th straight monthly increase for this datapoint.
This will likely prompt the question, "has housing bottomed"? I think the answer is yes, due to the fact that low interest rates and first-time buyer tax credits have helped spur demand. But a bottom for housing will not look anything like a bottom for stocks. By that I mean that the housing bottom is likely to be prolonged and shallow. I expect home prices to stop dropping, and bounce mildly in some areas, but I do not expect solid home price appreciation for a few years.
In other economic data, personal income for June fell -1.3%, but personal spending increased +0.4%. That is a good sign. For the economy to continue to strengthen we need to see consumers start to spend a little again.
Consumer staples are the strongest sector so far, helped by the acquisition of Pepsi Bottling Group by Pepsico. Utilities are the biggest laggard.
Asian markets were mixed overnight; the dollar is roughly flat; the 10-year yield is higher near 3.70%; and the VIX is flat near 25.50.
Trading comment: WMS-OLD reported strong profits and raised guidance, and the stock is spiking higher. I am taking profits here, and will look to reenter down the road a bit. Yesterday, I added Transocean (RIG) and AK Steel (NYSE:AKS). RIG should benefit from higher oil prices and an economic recovery, while AKS should benefit from stronger auto production and steel prices.
The market is still oversold, and I don't want to chase it here, but I am willing to buy individual situations that look promising.
Disclosure: long AKS, RIG