New-home sales fell in February, the latest sign of severe weather and rising mortgage rates slowing the housing recovery.
Sales of newly built homes fell 3.3% to a seasonally adjusted annual rate of 440,000 from a month earlier, the Commerce Department said Tuesday. January’s strong gain was revised down, to an annual rate of 455,000. The average rate for the first two months of the year is roughly unchanged from that for the final three months of last year. (…)
In reality, new home sales have been flat for over a year now. And you can continue to blame the weather if that suits you, although you might have difficulty explaining that sales in the West were also quite weak at -27.5% YoY vs -34.3% in the frozen Northeast. Builders seem to begin to understand that high prices may also have something to do with the lack of demand. (Charts from Haver Analytics)
The Commerce Department report showed the median price for a new home sold in February fell 1.2% from the same period a year earlier to $261,800. (…) A separate gauge released Tuesday showed strong house-price gains moderating slightly in January. The Standard & Poor’s/Case-Shiller index of prices for 10 major U.S. cities rose 13.5% in the year ended in January, down from 13.6% in December.
ECB Set to Mull Heavier Stimulus European Central Bank officials sent strong signals Tuesday that they are willing to consider dramatic steps to guard against dangerously low inflation, including negative interest rates and asset purchases.
The possible tools, cited by some top policy makers from different parts of the euro zone, include effective negative interest rates—meaning rates so low that commercial banks would essentially pay the ECB to park their extra cash overnight. They also include purchases of government or private-sector debt to hold down long-term rates and spur lending. (…)
Mr. Draghi was less specific Tuesday on what the central bank might do. But in a speech in Paris, he sought to underscore the bank’s resolve in fighting excessively low inflation, which weakens consumer spending, business profits and investment. “We will do what is needed to maintain price stability,” he said, adding that the ECB is paying close attention to the euro’s exchange rate.
The comment was reminiscent of his July 2012 pledge to do “whatever it takes” to keep the euro together. That remark triggered a lasting rally in government bond markets in southern Europe. The ECB didn’t even have to purchase any government bonds—Mr. Draghi’s words were enough. (…)
Mr. Liikanen said that while the euro’s exchange rate isn’t a policy objective, it does factor into the ECB’s assessment on inflation. The euro has approached $1.40 against the U.S. dollar in recent weeks, well above its long-term average. That makes prices of imported goods cheaper, weakening consumer-price growth when it is already well below the ECB’s target. (…)
Well, they may get inflation, but not the kind they really seek:
EL NINO GOES MAINSTREAM
I first mentioned the El Nino threat on March 11.
El Niño Threatens Australian Crops Meteorologists from Australia say the chances are increasing that the volatile El Niño weather pattern will return this year, adding to already difficult growing conditions globally that have sparked a rally in agricultural commodities from coffee to palm oil.
(…) El Niño is the abnormal warming of the Pacific Ocean that causes droughts in some areas and flooding in others, and happens every three to five years. El Niño last hit in 2009 and typically affects India especially hard because the country is reliant on seasonal monsoon rains for rice and sugar-cane crops.
The return of El Niño this year also would add to a strong rally in agricultural commodities prices because of existing droughts in large commodity-growing regions such as Brazil, California and Southeast Asia. Already, dry weather in the U.S., Eastern Europe, Australia and southern Ukraine is a worry and could impact wheat prices this year if there is damage to the crop, said Australian investment bank Macquarie. Wheat futures have risen in recent days because of dry weather in the U.S. southern plains region and persistent cold in the Midwest. (…)
The U.S. Climate Prediction Center issued an El Niño watch this month, citing a 52 percent chance of Pacific Ocean waters warming and creating – possibly – a wetter-than-average winter.
Historically, El Niño conditions have been associated with the state’s biggest rain years, including the winters of 1997-98 and 1982-83, which brought fatal mudslides to the Santa Cruz Mountains and devastating surf to the Southern California coast. In 1997-98, San Francisco was pounded by a record 47.2 inches of rain.
But never mind, it’s only the weather!
One-Third of Investors Still ‘Wary’ of Stocks, Wells Fargo Finds Despite the five-year rally, some investors apparently have long memories. Very long memories. In fact, fully one-third of investors in a new study from Wells Fargo are still “wary” of investing in stocks.
(…) The survey was conducted for the bank by the research firm TNS, which canvassed 500 affluent, retail investors (more than $500,000 in investable assets) in February. Of those surveyed, 33% said the crash of 2008 is still a factor in how much stock they are willing to own. Interestingly, that number jumped to 47% for investors who make their own investments, and fell to 27% for those who use an investment professional. (…)
After outperforming from mid-November through early March, the Nasdaq Internet group has gotten slaughtered over the last couple of weeks. Through mid-day today, the group was down 10% from its recent highs, and as shown in the chart below, it blew right through its 50-day moving average at the open this morning. Even after a 10% decline, though, it’s worth noting that the group is still above its lows made during the last market pullback in late January/early February.
The S&P 500 Biotechnology stock price index peaked at a record high on February 24. It is down 10.5% since then through yesterday’s close. It is still up 208% from its 2011 trough, when the forward P/E fell to 10. This valuation multiple is now 22.0.
“Sentiment has moved into a danger zone,” says Doug Ramsey, chief investment officer at Leuthold Group. The investment firm’s weekly sampling of 30 investor-psychology measures finds sentiment has moved to a three-year optimistic extreme. The last time it found a comparable reading the market dropped almost 20%. (WSJ)