Taper Coming Despite Weak Data? - Ahead of Wall Street
Monday, August 26, 2013
(Note: Many thanks to Mark Vickery for ably holding the fort in my absence last week.)
Hard to tell how this morning's underwhelming Durable Goods report plays out in the Taper debate, but there is no denying that this reading doesn't provide an inspiring picture of the economy. This report by itself is likely not enough to cause the Fed to delay a September taper, but some may start hoping that this combined with the weak housing report on Friday may prompt a Fed rethink.
Friday's sharp drop in New Home sales is perhaps the latest indication that the Taper talk and associated rise in yields is starting to have an impact after all. We will get more housing related data this week through the Case-Shiller home price index and the Pending Home sales numbers. But further housing data along the lines of new-home sales numbers would be indicative of the housing recovery stalling out. The stock market has been reflecting this loss of momentum already, with stock prices of all major homebuilders like D.R. Horton ( DHI ), KB Home ( KBH ), and PulteGroup ( PHM ) off materially since the start of the uptrend in mortgage rates in May.
Housing has been the economy's brightest spot thus far and a downgrade on that front will have a bearing on the overall growth outlook. I agree with the consensus view that the current economic picture is good enough for the Fed to make a move on the Taper issue, though this morning's Durable Goods and Friday's New Home sales data do give me second thoughts.
In corporate news, Amgen ( AMGN ) is purchasing cancer drug maker Onyx Pharmaceuticals ( ONXX ) for $10.4 billion. The deal wasn't unexpected as Amgen was believed to be looking at Onyx to tap into the cancer drug market. Onyx doesn't have much in terms of a drug pipeline, but its multiple myloma drug, Kyprolis, is expected to reach billion dollar sales in the next couple of years. The drug was approved last year and had sales of $125 million in the first half of the year.
Director of Research
AMGEN INC (AMGN): Free Stock Analysis Report
D R HORTON INC (DHI): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
ONYX PHARMA INC (ONXX): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report