Higher Interest Rate fears - now 70% chance of 50 basis point rate hike as measured by fed funds, strong economy, endless spending, CRB at 12 mo high and now the XAU and inflation whiff..
...<I think first ECI #, with still strong consumer confidence levels just reported. Now strong housing and car sales and whiff of inflation is in the house>...
From Bloomberg:
U.S. Economy: March Home Sales, LEI Point to Strength (Update3)
By Vincent Del Giudice
Washington, May 2 (Bloomberg) -- U.S. sales of new single-
family houses soared in March to their second-fastest pace on
record and an index of growth expectations rose, suggesting the
record economic expansion still has legs.
Sales of new single-family homes unexpectedly increased 4.5
percent in March to an seasonally adjusted annual rate of 966,000
units after dropping 0.6 percent in February. March's sales rate
was the best since setting a record in November 1998. It also
capped the best quarter since the fourth quarter of 1998, when
mortgage rates fell to a three-decade low.
Ford Motor Co., the world's second largest automaker, also
reported today that U.S. sales of cars and light trucks rose 11
percent in April from a year earlier, more than double forecasts.
General Motors Corp. reported a 1.9 percent gain as the world's
largest automaker lost ground to Ford and other rivals.
DaimlerChrysler AG's sales beat expectations, rising 5.8 percent.
``Higher interest rates are doing nothing to slow consumer
spending,'' said Joel L. Naroff, president of Naroff Economic
Advisors in Holland, Pennsylvania. Analysts had expected new home
sales to fall in March to 900,000-unit rate.
The index of leading economic indicators, a gauge of economic
performance for the next since months, rose 0.1 percent in March
after a February decline of 0.3 percent. The increase reflected
rising stock prices, low levels of unemployment claims and higher
orders for consumer goods. A separate survey of company purchasing
managers showed most are optimistic about business prospects for
this year.
Notes, Stocks
The reports come just two weeks before the Federal Reserve's
policy-setting Open Market Committee meets again to decide how
much to raise interest rates. Although central bankers have lifted
the overnight bank lending rate five times since June 30 -- from
4.75 percent to 6 percent -- the housing report in particular
suggests buyers are finding ways to skirt higher borrowing costs.
Rates on 30-year fixed-rate mortgages rose to a 3 1/2-year
high of 8.38 percent in February and have stayed above 8 percent
since then.
In financial markets, the U.S. Treasury's 10-year note fell
7/32 point, pushing up its yield 3 basis points to a seven-week
high of 6.31 percent. The Dow Jones Industrial Average fell 81
points, or 0.8 percent, to 10,731.12. The Nasdaq Composite Index
fell 173 points, or 4.4 percent, to 3785.45.
Copper for July delivery rose 2.15 cents, or 2.7 percent, to
82.15 cents a pound on the Comex division of the New York
Mercantile Exchange as the housing report indicated demand for
electrical wire and plumbing.
Cost Increases
The March pace was second after the 995,000 units at an
annual rate in November 1998. Home sales have averaged 940,000
units at an annual rate in the first three months of this year,
the best quarter since the fourth quarter 1998, when the rate on
30-year fixed mortgages averaged 6.76 percent, according to
Freddie Mac.
The median price of a new home rose to $165,000 in March from
$160,000 a month earlier. ``Builders are able to pass through cost
increases easily and that could embolden suppliers to raise
prices,'' Naroff said.
Higher home prices lifted first-quarter profits 1.3 percent
at Pulte Corp., one of the largest U.S. homebuilders. The
Bloomfield Hills, Michigan, company said last week that revenue
from domestic home sales rose 10 percent as the average price of a
home sold rose $18,000.
Nor are higher prices for raw materials and workers keeping
businesses from predicting growth in the next 12 months. More than
half -- 56 percent -- of the manufacturers surveyed by the
National Association of Purchasing Management expect business to
improve, the group said in a semiannual report. An even larger
share of non-manufacturing companies -- 63 percent -- said they
were optimistic.
About seven out of 10 companies surveyed expected to see
higher revenue this year. Similar numbers expected to pay more for
raw materials and labor.
Leading Indicators
The Conference Board's report on leading indicators showed
five of the 10 index components were positive contributors, while
five had negative effects. The index of coincident indicators, a
gauge of current economic activity including industrial output,
increased 0.4 in March after showing no change in February. The
index of lagging indicators was unchanged after rising 0.6 percent
in February.
U.S. sales from all manufacturers probably reached 17.4
million cars and light trucks last month at an annual rate,
according to analysts' forecasts. While down from the record rate
of 18.3 million in the first quarter, the expected April level
would be up 6.9 percent from a year earlier.
Ford's biggest boosts came from three new or redesigned cars
-- the 2000 Taurus, Focus compact car and Lincoln LS. General
Motors' sales were less than the 4.5 percent increase that had
been forecast. DaimlerChrysler, the No. 3 automaker in the U.S.,
had been expected to report a 1 percent gain from the year-earlier
month. The U.S. sales figures did not include Mercedes-Benz,
although they did include the new PT Cruiser, a car-truck hybrid.
¸2000 Bloomberg L.P. All rights reserved
Best Regards, J.T. |
