U.S. New Home Sales Rose in March
Purchases of newly built single-family homes—a relatively narrow slice of all U.S. home sales—increased 4.0% from the prior month to a seasonally adjusted annual rate of 694,000 in March, the Commerce Department said Tuesday.
March’s rise comes on the back of a 3.6% increase in February [to 667,000, revised from 618,000] and upward revisions for both January and February sales rates. (…) Sales rose 8.8% through the 12 months ended in March.
The number of homes for sale at the end of March grew about 13% from a year earlier, signaling that home construction is beginning to catch up with buyer demand.
The median sale price for a new home sold in March was $337,200, up 4.8% from a year earlier.
WEAK RICHMOND FED SURVEY
- April collapse in manufacturing and services:
- Manufacturing new orders cratered:
- Manufacturing wages exploding, not in services:
- Manufacturing margins squeezed:
MORE MARGINS SQUEEZE
Pain from the tight trucking market is stretching deeper into shipper supply chains this spring. Consumer packaged-goods companies say higher transportation costs are weighing on their earnings as they scramble to get goods to stores and distribution centers, and some see their concerns persisting through the rest of the year. WSJ Logistics Report’s Jennifer Smith writes that freight costs were up 20% year-over-year at Coca-Cola Co.’s North American division in the first quarter, as unusually strong demand from manufacturers and retailers outstripped the supply of available trucks. That’s making it harder and more expensive for companies like Hasbro Inc. HAS 0.16% and Nestlé SANSRGY -0.08% to keep toys, household chemicals and other products moving. The rising costs to start the year come as analysts forecast contract rates for truck transportation could grow nearly 10% this year, costs companies will eventually pass on to consumers. (WSJ)
SENTIMENT WATCH
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How 3% Yields Could Reshape the Investing Landscape
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U.S. 10-Year Yield Breaching 3% Bolsters Calls for Higher Rates
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Treasuries’ March Above 3% Faces Challenge From Stock Slump
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U.S. Investors Just Gave Up on the Bull Market
With equities almost three months removed from the last record, Americans have grown less optimistic that the market will bounce back. For the first time since Donald Trump’s shock election in November 2016, a majority of consumers expect stocks to be lower 12 months from now, according to the latest sentiment reading from the Conference Board. (…)
April’s Conference Board survey capped three months of deteriorating sentiment toward the stock market, with the latest reading pushing the slide to the biggest since the period ended August 2011. That was the height of the debt-ceiling drama that sparked a downgrade of the U.S. credit rating. (…)
TEMPTING?
Tempting to be a contrarian after excessive expectations have corrected per the Conf. Board survey above. But, in reality, expectations have only retreated to zero and are not deep in “buy low” territory.
The same can be said of valuations. “Normalizing” trailing EPS for a full year of lower tax rates (about $145), the Rule of 20 P/E has dropped back to its long term “fair” or median value.
Picking up where DoubleLine CEO Jeff Gundlach left off yesterday with his Ira Sohn recommendation, which as a reminder was to short Facebook on concerns of regulatory crackdown and go long commodities ahead of a late-cycle inflationary boom, on Tuesday Gundlach spoke at an event for DoubleLine clients and reiterated his late-cycle skepticism, warning that treasuries are still “not attractive” even though the benchmark 10Y yield briefly crossed the key 3% threshold earlier in the day.
The bond king said he is in no rush to buy, well, bonds, because he expects that, based on recent Core CPI prints and the NY Fed underlying inflation gauge, that US inflation will go even higher, sending Treasury prices lower. The fund manager said some indicators are suggesting 3% inflation, and noted that while it might not get there, “something higher than the current rate is sensible.” (…)
Gundlach said that he does not think the yield curve will invert before the next recession. This likely goes to Gundlach’s thesis, which he proposed in January, that in the next recession we won’t see a bid for safety out of stocks and into bonds. In other words “we won’t see a bond market rally.” (…)
First, Gundlach said he thinks that Fed chair Jerome Powell is “not going to bail out the market.” (…)
Second, Gundlach said that the next big move will likely be in gold prices which have broken their downtrend line, and are on the verge of breaking out to the upside. “It’s getting almost exciting… something big is happening,” he said cryptically.
He then revealed his target, saying that based on classic chart reading, an “explosive, potential energy” of a huge “head-and-shoulders bottom” base was signaling a move of $1,000 in gold prices, and added that “Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good.”
But so is the S&P 500 Index:
Lowry’s Research yesterday said that “while NY Comp. Volume jumped to about 3.8 billion shares, Down Volume was a subdued 60% of total Up/Down Volume, suggesting much of [yesterday’s] weakness was due to a lack of buying interest, not to widespread intense selling. Thus, [yesterday’s] decline appears to be part of the truncated rallies and reactions that have characterized market activity over the past two months.”