Investor’s first read – Brooksie’s edge before the open
Monday, March 19, 2012 9:02 a.m. ET
S&P 500: 1404.17
Nasdaq Comp.: 3055.26
Russell 2000: 830.18
We have had a big run in the stock market since early October with a gain in the broad-based S&P 500 of 31%. An extension of this leg in the bull market that started three years ago will depend on the obvious, the absence of a serious European-style crisis and an acceleration in our economic recovery.
A rebound in the housing market could be the catalyst for that acceleration. The demise of the housing market was a major contributor to the Great Recession 2007 to 2009. What’s more, its absence from our economic recovery , has deprived it of needed momentum.
THAT MAY BE CHANGING.
This week’s economic reports are heavily weighted with housing reports, which may give us a read on whether this vital sector is ready to contribute. (SEE below)
A revival in the homebuilding industry would reduce unemployment and jump start the building supply industry. An acceleration in the sale of new and existing houses would unlock a lot of funds heretofore dormant, and would result in a rebound in the price of houses and consequent increase in homeowners’ wealth effect. That in itself would bump up consumer spending.
Three upbeat housing market reports during the week of December 19, 2011 were the springboard for a 15% surge in the S&P 500. The Street will be watching closely for confirmation that the recovery in this vital sector of our economy is shifting into second gear.
TODAY: Option expires Friday had little effect on the stock market, but could impact it today. Obviously, disappointing Housing Market Index report at 10 a.m. would trigger some selling. Minor support is DJIA: 13,177 (S&P500: 1400). Make a note of the housing reports (See below) due to be reported this week. Only one, Housing Starts, will be reported before the open tomorrow, the rest come at 10 a.m..
- Housing Market Index (10 a.m.): February’s index jumped 4 points to 29, the second straight 4-poing jump and 5th increase in a row. The Index is a weighted average of separate diffusion indexes covering new home sales, sales expected within 6 months, and buyer traffic.
- Housing Starts (8:30 a.m.) – rebounded 1.5% in January following a 1.9% drop in December Multifamily homes led the increase.
- Existing Home Sales (10 a.m.) –Rose 4.3% in January to a 4.57 annual rate reaching a 20-month high.
- Jobless Claims ( 8:30) –Decline for the week ending March 10. The 4-week average remains at 355,750.
- FHFA House Price Index (10 a.m.) – improved slightly in December with a 0.7 increase, the same as in November. Versus a year ago, the Index is down 2.5%
- Leading Indicators (10: a.m.) –January’s index was up a strong 0.4%
- New Home Sales (10 .a.m.) – declined 0.9% in January after a sharp increase in December. The median house price edged up to $217,100 in January.
Feb. 27 DJIA: 12,981 “Stock Prices: “May the Force Be With You”“
Feb. 28 DJIA: 13,005 “Big Test for Bulls Today“
Feb. 29 DJIA: 12,952 “Opportunities Exist Even in a Lethargic Market“
March 1 DJIA: 12,980 “Bull Market Intact – But Correction Likely in Coming Weeks“
March 2 DJIA: 12,977 “Selective Opportunities – Don’t Get Careless“
March 5 DJIA: 12,962 “Up or Down? Week’s Economic Reports Hold Key“
March 6 DJIA: 12,759 “Technical Correction Underway For Wall Street“
March 7 DJIA: 12,837 “Not Yet! Market Will Probe for a Comfort Level“
March 8 DJIA: 12,907 “Uneasy Market Anticipates Peaking Gas Prices“
March 9 DJIA: 12,922 “Easy Does It! Market is Selective Buying Only“
March 12 DJIA: 12,959 “Bulls Hanging Tough Against Correction”
March 13 DJIA: 13,177 “Threshold of a Big Market Move?“
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.