Disappointing housing data may trump early week enthusiasm and cast a pall on the market going forward. The S&P may have been clinging onto those fresh highs with tenacity, but the latest news could mean a choppy uphill battle is ahead.
Today’s housing data failed to impress, falling short of the expectations from at least one survey of economists. New home construction dropped to a six month low according to Commerce Department Data. Building permits – considered one of the signs of things to come on the housing front – was at the lowest level since May.1
This kind of news could deliver more uncertainty for the future of the housing sector despite the extension of tax credits. Government credits cannot go on indefinitely, but hopes had been up earlier in the week when retail sales delivered a surprise bump. A gain of 1.4 percent in October was helped along by automobile sales despite the expiration of the cash for clunkers program.2
Resiliency or perceived consumer strength in the face of mounting unemployment will be the keystone for retail and housing. Employment and housing will weigh on market sentiment. Even a hint of stabilization in jobs would mean everything to this market. As it stands, forecasts have been suggesting continued weakness at least through the end of the year and much of 2010.3
Also on tap this week, CPI and PPI data showed gains on food and fuel prices. This is unlikely to derail Fed plans to keep interest rates at historic lows since the core value for CPI was pretty much in line with expectations. Heading towards the close of the year it would be difficult to rule out another move higher for the market, but things are likely to move at a slower pace.
1 http://www.marketwatch.com/story/us-oct-housing-starts-down-sharply-2009-11-18
2 http://www.marketwatch.com/story/retail-sales-rise-14-on-rebound-in-autos-2009-11-16
3 http://online.wsj.com/article/SB125837665919850337.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird
Past performance is not necessarily indicative of future results.
Past performance is not necessarily indicative of future results.
Disclaimer: Futures and options trading involves substantial risk of loss and is not suitable for everyone.
Copyright © 2009 LaSalle Futures Group™
