Wednesday, February 22, 2012
Stock Market Commentary:
China’s Manufacturing Sector Improved But Still Contracting & Greece Woes Flare Up Again:
Stocks opened lower on Wednesday after China said its manufacturing sector slid for the fourth consecutive month. The HSBC purchasing managers index (PMI) rose to a four month high at 49.7 but still remained below the critical boom/bust line of 50. The PMI is used as an early indicator for China’s industrial activity and was hurt due to sagging exports to Europe. The European Central Bank said that it wants local governments to begin taking responsibility for shoring up their country’s finances.
U.S. Housing Market Remains In Flux: Housing Stocks Pulling Back To Consolidate Recent Move
In the U.S. the Mortgage Bankers Association said mortgage applications slid by a seasonally adjusted -4.5% in the week ending February 17, 2012. The report factors in both new purchases and refinances. Existing home sales swelled by +4.3% last month to a 4.570 million annual rate. The median home price tanked by -4.6% to $154,700. This decline suggests the housing market has yet to bottom and the decline is confirmed by a 4.0% decline for the average price to $201,200. Year-on-year rates also show a small single digit contraction.
Market Outlook- Confirmed Rally
Risk assets (stocks, FX, and commodities) have been acting better since the latter half of December. Now that the major U.S. averages scored a proper follow-through day the path of least resistance is higher. Looking forward, one can err on the long side as long as the benchmark S&P 500 remains above support (1292). Leadership is beginning to improve which is another healthy sign. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!