US Economic and Market Daily

Technorati Tags : US Market, economic update

Recap:

The NASDAQ and S&P 500 gained while the DJIA declined. Housing starts declined by 10% in September to a total of 1.19 million units.

Preview:

Initial jobless claims likely declined by 8,000 in the week of October 13, while beneficiaries rose by 14,000 during the filing period ended October 6.

Today's Developments

US equities were mixed today with the NASDAQ and S&P 500 up 1.04% and 0.18%, respectively, while the DJIA fell 0.15%. The disappointing housing starts data and a new record high for oil weighed on markets today. One-month oil futures traded up to $89.00 per barrel, on a deteriorating geopolitical climate in the Middle East, before closing at $87.18.

Treasuries advanced sharply, amid a flight to quality, as a worse-than-expected housing starts print and soft permits data signaled further weakness in October. The two-year yield closed at 3.98%, a 14bp move, and the ten-year yield retreated to 4.56%.

The dollar erased most of yesterday's gains against the euro ending the day at 1.4190. The yen gained again versus the dollar closing at 116.770 from 116.93 Tuesday.

The housing sector remained in a tailspin in September, while inflation continued to moderate. After the third quarter squeaked by with solid growth, largely on a narrower trade deficit, current data provided very little momentum heading into the fourth quarter.

Housing starts declined by 10% in September to 1.19 million units annualized. Most of the drop was in multifamily units, after a temporary surge boosted August numbers. Still, the report showed a 7% drop in building permits across all categories, suggesting that declines in construction activity are poised to accelerate in 4Q. With new home inventories exceeding eight months' supply (near two-decade highs), quickly falling construction can help alleviate the overhang. But so far, sales have fallen far faster than supplies. We await home sales data next week, which are also expected to reveal continued softening.