Markets were reluctant to move yesterday once again as mixed
economic data provided no definite clue to the investors about what
awaits them ahead of Ben Bernanke's speech at Jackson Hole on
Friday. While the Dow and S&P 500 ended with paltry losses,
Nasdaq managed to edge up with minute gains. As investors speculate
about what Bernanke will have to say about the state of the economy
and whether he wishes to initiate further economic measures,
volumes continued to be low.
The Dow Jones Industrial Average (DJI) slipped 0.2% and ended at
13,102.99. The Standard & Poor 500 (S&P 500) ended hardly
changed, dropping a meager 0.1% to close at 1,409.30. The
tech-laden Nasdaq Composite added 0.1% and finished yesterday's
trading session at 3,077.14. The fear-gauge CBOE Volatility Index
(VIX) was up 0.9% and settled at 16.49. Consolidated volumes on the
New York Stock Exchange, American Stock Exchange and the Nasdaq
were roughly 4.6 billion shares, sharply lower than the
year-to-date average of 6.6 billion shares. Advancing shares moved
past the decliners on the NYSE; as for 54% stocks that gained, 41%
closed lower.
Two key economic reports, one about consumer confidence and the
other on home prices, came out yesterday and sent out mixed
signals. While consumer confidence data was dismal, the home prices
report was encouraging. In the process, the markets hardly
moved.
The Conference Board reported that the Consumer Confidence Index
dropped from 65.4 in July to 60.6 in August. This comes after a
gain in July and the index was also way below consensus estimates
of a reading of 66. It is also the index's lowest level in nine
months. The Director of Economic Indicators at The Conference
Board, Lynn Franco, commented: "A more pessimistic outlook was the
primary reason for this month's decline in confidence. Consumers
were more apprehensive about business and employment prospects, but
more optimistic about their financial prospects despite rising
inflation expectations". Meanwhile, the Expectations Index declined
from 78.4 to 70.5 and the Present Situation Index was almost flat
at 45.8.
However, the negative sentiment arising out of this report was
somewhat offset by the strength in the Standard &
Poor's/Case-Shiller home price data. According to the report, the
S&P/Case-Shiller 20-city composite index registered a yearly
gain of 0.5% in June 2012. On a month-on-month basis, the 20-City
Composite gained 2.3%. The report noted: "All three headline
composites ended the second quarter of 2012 with positive annual
growth rates for the first time since the summer of 2010".
This data lifted the housing sector and the SPDR S&P
Homebuilders (XHB) added 0.2%. Among the housing stocks, Lennar
Corporation (NYSE:
LEN
), Hovnanian Enterprises, Inc. (NYSE:
HOV
), PulteGroup, Inc. (NYSE:
PHM
), NVR, Inc. (NYSE:
NVR
) and The Ryland Group, Inc. (NYSE:
RYL
) added 0.8%, 1.9%, 0.3%, 0.7% and 0.4%, respectively.
Moreover, the investors' wait-and-watch attitude continued as
Federal Reserve Chairman Ben Bernanke's speech at Jackson Hole is
scheduled on Friday. Investors are eagerly waiting to hear what Ben
Bernanke has to say about the economy and measures to boost it. The
run up to this speech on Friday has seen decent volatility. Thus,
the speech has gained all the more importance and all eyes are
fixed on it now.
Talking about the run up to the speech at Jackson Hole, the
minutes from the Federal Open Market Committee's (FOMC) meet that
was released last week suggested that "many members" were in favor
of additional measures. However, St. Louis Fed President James
Bullard created uncertainty about additional economic stimulus
arriving anytime soon just a day after. He said the present
economic situation does not warrant the need for QE3.
In fact, quiet a number of investors now are of the opinion that
Bernanke might not be coming up with anything grand now.
Strategists note that a big move by the central bank is less likely
now and they will continue to interpret the economic readings for
future action.
HOVNANIAN ENTRP (HOV): Free Stock Analysis
Report
LENNAR CORP -A (LEN): Free Stock Analysis
Report
NVR INC (NVR): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
Report
RYLAND GRP INC (RYL): Free Stock Analysis
Report
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