Sell-Off Extends into Tuesday
Stocks have been extremely volatile Tuesday morning, and after opening higher all indexes are negative 90 minutes into the trading session.
The Dow is leading the decline with a 0.53% drop to 8294, while the Nasdaq is 0.50% lower at 1757, and the S&P is down 0.29% at 890. This week has erased any year-to-date gains for the S&P, which is now down 1.47% since the start of the year.
The increased risk in equities has led investors into the safety of government bonds: the 10-year yield is down to 3.63%.
In data the main news this morning was the 2.4% gain in Existing Home Sales, which marked the first back-t0-back gain in sales since September 2005.
The National Association of Realtors said demand is up due to falling house prices (down nearly 17% since last year), the first-time buyer tax credit, and low mortgage rates (the average 30-year rate was 4.86% in May.)
At the current sales pace, there is a 9.6-months’ supply of inventory on the market, compared to 10.2-months in the previous report and 10.9-months in March.
“The back-to-back gains in May could conceivably be an early indication that U.S. housing market activity may be on the mend,” said TD strategist Millan Mulraine. “Moreover, with pending home sales rising for three consecutive months in April momentum may perhaps be on the side of existing home sales.”
Also released at 10 am, the FHFA home price index, which is calculated using purchase prices of homes sold with mortgages guaranteed by Fannie Mae, showed a 0.1% decline in April, a much softer slide than the -1.7% print in March. The market consensus was for a 0.4% drop.
The FHFA index said prices were 6.8% lower than last year, but its results have been much more moderate throughout the recession than the Case Shiller index, which recorded an 18.7% decline in April.
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