Thursday, June 04, 2009

Will Home Prices In The U.S. Follow The Bounce In UK Housing?

Stocks are slightly higher in early trading, led by a bounce in the financials and tech stocks, while retails stocks are lagging.

The ECB and BoE both left their benchmark interest rates unchanged at 1.0% and 0.5%, respectively. The Wall Street Journal reported that home prices in the UK rose +2.6% last month, which marks their strongest monthly gain in more than six years.

If you look at UK home prices vs. the US over the last several years, you can see that the price patterns in the US lagged that of the UK, both on the upside and on the way down. So is it possible that a nascent rally in home prices across the pond could precede a bounce in home prices here in the U.S.? Talk about something that would lift the markets higher.

Energy stocks are also bouncing on a rise in oil prices. Goldman Sachs forecasted that oil prices will reach $85 this year (crude prices are currently near $68). Retail stocks are lagging after many companies report lackluster same-store sales growth for May.

In economic news, initial jobless claims eased lower for the fourth straight week, another good sign. And productivity data was revised higher, showing it rose +1.6% in Q1 from its previous estimate of +0.8%.

Asian markets were lower overnight; the dollar is lower today, after a big bounce yesterday; the 10-year yield is higher to 3.64%; and the VIX is still hovering around that key 30 level, currently 30.27.

Trading comment: No trades yesterday or today, so far. Yesterday, the SPX tagged that 925 level that I highlighted and bounced higher from it, right on cue. Volume ran lower yesterday than the previous day, helping the market avoid a distribution day (marked by a selloff that comes on higher volume). So it looks like just more consolidation, which is a bullish way of working off the overbought condition.


Post a Comment

<< Home