Thursday, May 16, 2013
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The stock market has plenty to chew on in today's trading session
and most of the data this morning in on the negative side.
Jobless Claims jumped in the wrong direction, while Housing
Starts came in weaker than expected and the CPI numbers seem be
in the benign territory. The housing data is not all bad, as
housing permits came in much better than expected.
Housing Starts for April came in weaker than expected and the
numbers for March were modestly revised lower. The consensus
expectation was for April starts to come in at the seasonally
adjusted 969K annualized pace, below March's one million rate
where they had reached for the first time in 5 years. But Starts
actually came in at 853K and the March tally was revised down to
1.02 million from the originally reported 1.03 million. The
negative surprise notwithstanding, the current Starts level
represents a significant improvement over the year-earlier level.
We should keep in mind, however, that Housing Starts still remain
below the roughly 1.3 million level considered 'normal' for the
U.S. housing sector (Starts were above 2 million during the
On the positive side, Building Permits came in better than
expected, crossing the one million mark for the first time in 5
years. The surge in Permits assure that building activity should
maintain the positive momentum in the coming months. We saw this
in the April homebuilder sentiment index as well. The index,
which came out Wednesday, showed an improvement for the month
after stalling out over the last few months.
The construction and broader housing industry remains the
economy's brightest spot, helping offset weakness from the
factory floor and headwinds resulting from fiscal tightening like
the payroll tax increase and the budget sequester. This morning's
earnings miss from
) is a timely reminder that these fiscal drags are having an
impact on consumer behavior even though we haven't seen much
corroborating evidence in economic data at this stage.
The tone of this morning's data is negative, but this need not be
a big problem for the stock market. In the convoluted logic of
looking at every piece of economic data from a Fed-inspired
prism, soft economic data provides good-enough justification to
double down on stocks. Will we see the same trend play out in
today's trading session as well? We will find out soon enough.
Director of Research