U.S. Pending Home Sales Improve Slightly
The National Association of Realtors (NAR) reported that pending home sales rose 0.2% (1.0% y/y) during June following an unrevised 3.7% May decline. These sales are reported as an index with 2001=100.
U.S. Durable Goods Orders Tumble 4.0% on Overseas Turmoil Demand for long-lasting factory goods fell sharply in June, a sign overseas turmoil is weighing on U.S. manufacturers.
New orders for durable goods—aircraft, industrial machinery and other products that are designed to last at least three years—decreased a seasonally adjusted 4.0% in June from the prior month, the U.S. Commerce Department said Wednesday. The drop comes after May’s downwardly revised fall of 2.8%. Through the first half of the year, durable good orders were flat compared with the same period in 2015.
The June decline was led by weaker demand for civilian aircraft and defense products, but there was a pull back in several other categories including computers and metals. Economists surveyed by The Wall Street Journal had expected a decline of 1.4%. (…)
Orders for durable goods excluding the transportation category fell 0.5% from May, and orders excluding defense fell 3.9% last month. Transportation demand declined 10.5%, largely due to a 58.8% drop in civilian aircraft orders, a highly volatile category. (…)
In a positive note, a closely watched proxy for business investment, new orders for nondefense capital goods excluding aircraft, rose 0.2% in June from May, after falling the prior two months. Still orders in the category were down 3.8% in the first half of the year compared with the same period in 2015. (…)
The durable orders report stands in contrast to other recent data suggesting the U.S. manufacturing sector stabilized in June. A Federal Reserve report showed manufacturing output was modestly above year-earlier levels in June. The Institute for Supply Management’s gauge showed manufacturing activity in June to its highest level since February 2015.
Wednesday’s report showed orders for motor vehicles and parts rose 2.6% in June from May, and demand for machinery only slipped 0.1%.
Shipments of durable goods rose 0.4% during the month, but are still running behind the rate set in the first half of last year.
Fed Leaves Door Open to September Move The Federal Reserve upgraded its assessment of the economy’s performance and said near-term risks to the outlook have diminished, effectively leaving the door open to raise rates later this year, possibly as early as September.
Near-term risks to the economic outlook have diminished.
EARNINGS WATCH
More than half way:
- 230 companies (55.1% of the S&P 500’s market cap) have reported. Earnings are beating by 5.9% while revenues are surprising by 1.0%.
- Expectations are for declines in revenue, earnings, and EPS of -0.6%, -4.4%, and -2.1%, respectively.
- EPS is on pace for +0.6%, assuming the current beat rate for the remainder of the season. This would be +4.8% excluding Energy and the Big-5 Banks.
SENTIMENT WATCH
Are stocks the “new bonds”? (The Daily Shot)
Carlyle Rainmakers Cast Dark Cloud Over Returns The private-equity firm said soaring stock markets and intense competition for deals will make it harder to reap big profits on leveraged buyouts.
(…) Investors are “willing to take lower rates of return than the kinds that we’ve averaged over our history,” Mr. Rubenstein said. “It’s just so difficult now with low interest rates and low equity market appreciation to get these kind of returns anywhere else.” (…)
CETERIS NON PARIBUS:
Unilever is paying $1 billion for Dollar Shave Club, a five-year-old start-up that sells razors and other personal products for men. Every other company should be afraid, very afraid.
The deal anecdotally shows that no company is safe from the creative destruction brought by technological change. The very nature of a company is fundamentally changing, becoming smaller and leaner with far fewer employees. (…)
Everything changed in 2012, when Mr. Dubin’s comedic free ad posted on YouTube. Within 24 hours, the new business had more than 12,000 orders, more than it could handle. The ad went on to get over 20 million views and rocket Dollar Shave Club to over $240 million in revenue. (…)
It captured about 8 percent of the market in only a few years. It also expanded into other personal care products like “One Wipe Charlie,” a wet wipe to replace toilet paper. (…)