By Jason Simpkins
U.S. stocks were flat Friday, after a cluster of positive economic data calmed the waters enough for Wall Street to fight back at week’s end from Thursday’s steep sell-off.
The Dow Jones Industrial Average Index was up just 21 points in early afternoon trading and held steady to close up 21.41 points at 11,370.69. The Standard & Poor’s 500 Index was up 23 points in early afternoon trading before slipping back to a gain of just 5.22 points to close at 1,257.76.
The Dow Jones dropped 283.10, or 2.4%, points last Thursday – the biggest one-day slide since 2000.
A report from the National Association of Realtors that indicated sales of existing homes fell to their lowest level in a decade in June was a big reason for sell-off, but healthy revisions to new home sales in March, April and May, and better than expected June sales, failed to assuage fears associated with the still lumbering housing market.
The Commerce Department said new home sales slipped to a seasonally adjusted rate of 530,000 units in June, a 33.25% decline from a year ago, but better than the 505,000 unit pace forecast by analysts. New-home sales in May were revised to a 533,000 level compared with the previous estimate of 512,000.
The supply of homes fell to 10 months' worth from 10.4 months in May, an indication that surplus inventory is being cleared off the market. There were 426,000 homes for sale at the end of June at an annual pace, the fewest since December 2004.
"New home sales look to be reaching a bottom and that is good news for everyone," said Joel Naroff, president and chief economist of Naroff Economic Advisors. "We have moved up from the truly awful March number and seem to be settling on a somewhat higher base."
"While there are still way too many homes for sale and it is taking too long – over eight months – to sell a house, the declining inventory will allow the adjustment in the market to continue," he added.
Another positive sign for the economy was an unexpected jump in orders for durable goods. Orders for durable goods unexpectedly rose 0.8% last month to a seasonally adjusted $215.43 billion, the Commerce Department reported Friday. The increase was largely attributed to record exports that have been accelerated by a weak dollar and strong global growth.
Bookings for non-defense capital goods excluding aircraft climbed 1.4% after a 0.1% decrease in May. Shipments of those items, which is a figure used in calculating gross domestic product, jumped 0.7% after a 0.2% gain.
"We hesitate to conclude that a bottom is being formed, although the rate of adjustment seems to be slowing considerably," Daiwa Securities American analyst Michael Moran told the Wall Street Journal. "The recent figures, along with similar results in the existing home market, support the view that the drag from housing should be lessening as the year progresses."
On the consumer front, the Reuters/University of Michigan final index of consumer sentiment increased to 61.2 in July from 56.4 in June, as stimulus checks continued to shore up spending. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July.
News and Related Story Links:
- Wall Street Journal:
June Durable-Goods Data Are Stronger Than Expected