Though its market-moving grade is somewhat questionable, the NARs pending home sales report had the final say over the housing markets health in October. Despite this additional bearish pressure on an integral sector of the US economy, there was little reaction from the dollar as traders draw up plans to trade tomorrows ISM services report.
Ranges dominated the majors landscape today, with the euro putting up a 1.3370 Asian session high that quickly fell back to an 85-point range above 1.3280 support. An overnight 1.9840 high for the pound sterling against the dollar pulled back to 1.9725 in more liquid hours, with the 1.9800 figure turning into a happy median. Range trade was more prominent in the USDJPY pairing, with congestion between 115.80 and 115.30 defining most of the sessions price action. Finally, a double touch on big resistance at 1.1900 set the dollar in motion against the USDCHF. Since reaching 1.1990, the pair has settled by 50 points.
The natural ebb and flow of the US economic calendar moved back to the trough Monday, as the markets sailed through a rather light day of news. The one indicator on deck was the National Association of Realtors Pending Home Sales index for October. Following the mixed prints of existing and new home sales for the same period released last week, the pending numbers were primarily a confirmation tool for the slight opaque conditions in the sector. Existing sales for the month corrected 0.5 percent higher, for the first increase in eight months; while the new home report reinstituted its own decent on a 3.2 percent drop. Since the purchases of newly completed residences are typically seen as the leading group in the over sector, the bias remains obstinately bearish. Todays pending home sales, measured by contract signings rather than closing procedures, even took some of the bullishness from the existing read off the table. Contracting 1.7 percent in October, the slide in uncompleted sales was the biggest in three months. Whats more, the weakness was felt in all four regions of the United States, led by a 2.7 percent decline in the West and 2.1 percent drop in the Northeast.
A broader picture of the economy now sees the weakness in housing sales is only one issue going forward. Aside from accounting for a generous portion of economic growth through building and related costs, a bulk of consumers wealth is typically tied up in their homes. This sets up the biggest drop in existing home sales on record while affordability hovers near 20-year lows as long-term evidence that the housing market will struggle to make a contribution to growth for some time. Furthermore, despite Fed Chairman Bernankes comments that he has yet to see the housing weakness broadly spill over to other sectors, the other pillars of the economy are starting to crumble. Last week, the ISM factory report revealed the first contraction in manufacturing in over three years. Now it lies to the ISMs services report, due tomorrow, to put fourth quarter growth expectations on pace.
Equities were broadly moving higher Monday as a number of mergers helped offset the declines in some hard hit blue chips. By 16:40 GMT, the NASDAQ Composite was leading pacing the market ascent with a 1.36 percent rally to 2,446.13. The S&P 500 followed with a 0.65 percent pick up to 1,405.76 while the Dow grew 0.55 percent to 12,260.86. From the big names on the lam, drug-maker Pfizer was one of the leaders. Shares of Pfizer were hammered $3.19 or 11.5 percent lower to $24.67 after announcing a halt on one of its cholesterol drugs. In the financials, the Bank of New York announced it would buy Mellon Financial Group to make a $43 billion giant. BoNY shares were up 11.6 percent on a $4.10 advance to $39.58 while those of Mellon climbed 6.2 percent or $2.47 to $42.52. Shifting once more to the tech sector, LSI Logic Corp. told the markets it would by Agere for $4 billion, sending LSI shares plunging 13.1 percent or $1.38 lower to $9.18.
The steady rally in treasury paper met some selling pressure at the open of this week as the crowd calling the market overbought finally won momentum on speculation rate cuts were overestimated. T-notes were unchanged by 16:40 GMT at 101-16 while yields were untouched at 4.435. Longer-term bonds were also at par at 99-08 while yields held to 4.546.
