September 26, 2017

The major stock market averages opened slightly higher this morning (Dow +26 pts; SPX flat). Gains are led by retailers and the transports. The tech sector is rebounding from a rough week. Gold miners and biotechs are trading lower. WTI crude oil is trading down .9% to $51.76/barrel, and that’s taking energy stocks down a bit. European markets are poised to close slightly higher today, and are up roughly 20% so far this year. Asia was mixed overnight but, importantly, isn’t showing any signs of investor panic due to saber rattling in North Korea. Bonds are trading slightly lower today as interest rates throughout the economy tick upward. The 2-year Treasury bill yield is up to 1.44% and the 5-year yield is trading at 1.85%. The 10-year Treasury yield, which track longer-term inflation expectations, is up around 2.23%. 

New home sales fell 3.4% in August to an annualized rate of 560,000 transactions, continuing the trend of recent months. Purchases fell the most in the South, where homebuying activity was definitely impacted by hurricanes Harvey and Irma. Even without this temporary setback, however, homebuying activity has leveled out due to low for-sale inventory and rising home prices. Affordability is becoming an issue. In August, the supply of homes for sale actually rose a bit to about 6.1 months’ worth. We’ll see if that continues. As for prices, S&P’s Case-Shiller Home Price Index rose 5.9% from year-ago levels. Price growth has been accelerating gradually over the past year. 

The Conference Board’s US Consumer Confidence Index edged lower this month to a level of 119.8. It looks like damage caused by recent hurricanes in the South negatively affected the survey. Consumer confidence hit a 17-year high back in March at a level of 125. Since then, consumers’ confidence in the economy has sagged a bit but still remains at very high levels. The Conference Board’s statement noted, “…consumers’ assessment of current conditions remains quite favorable and their expectations for the short-term suggest the economy will continue expanding at its current pace.” 

The CEO of Equifax (EFX) has resigned in the wake of the company’s bungling of a cyber security breach that affected about 140 million Americans. Equifax, which monitors and grades consumers’ credit, lost social security numbers, birth dates, credit card numbers and other personal information in the hack. The stock is down about 27% since announcing the breach.  

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