The S&P 500’s winning streak was holding intact approaching midday in New York, with the index advancing 0.50% to 1881.3, on course at that level to achieve a run of six successive days of gains.
By Peter Martin
Tuesday, April 22, 2014
The other leading stock index benchmarks also advanced, with the Dow Jones Industrial Average rising 0.57% or 93 points to 16,524 and the NASDAQ 100 bouncing 0.86% to 3590.5. The stock market gains reflect news flow that has been encouraging, with a number of companies reporting modestly improved first-quarter earnings, including Netflix which revealed better-than-expected earnings. Dow component McDonald’s disappointed though, announcing a fall in same-store sales and a decline in earnings compared with the same quarter in 2013, alongside a small increase in revenue. Somewhat predictably, bad weather was trotted out as a contributing factor by CEO Don Thompson.
Macroeconomic data has also been generally upbeat, with news that house prices continue to appreciate and a rebound in one of the Federal Reserve’s regional manufacturing surveys. The Federal Housing Finance Agency (FHFA), which uses data from Fannie Mae and Freddie Mac, said today that house prices climbed higher in February, with a 0.6% month-on-month change in its House Price Index, following January’s downwardly-revised 0.3% increase, making for a year-on-year change of 6.9% in February. Historically, house price gains have added to consumer confidence, which should have a positive effect on the economy. Other housing data this morning was not quite as cheering, though, with existing home sales still apparently hampered by the double-whammy of high house prices and unappealing mortgage rates. Existing home sales fell to a seasonally-adjusted, annualized rate of 4.59 million last month from 4.60 million in February. Year-on year sales are down 7.5%, the decline picking up pace from the 7.1% fall seen the month prior.
The Richmond Fed’s manufacturing index has rebounded impressively this month, springing back into expansionary territory with a reading of 7 in the latest survey of manufacturing businesses in the fifth district, after languishing at negative levels, indicative of contraction, for the past couple of months. The new orders component of the survey shows a notable turnaround, hitting +10 after a -9 reading in the last two surveys, which bodes well for next month, and the strength of the report in general will raise hopes that manufacturing can take up some of the heavy lifting for the economy.
Looking at forex, the British pound strengthened against the euro and the dollar today, a day ahead of the release of the minutes from the last monetary policy meeting of the Bank of England. GBP/USD rose 0.24%to 1.6831, close to the four-year high of 1.6842 attained last week. The Bank of England’s Monetary Policy Committee (MPC) decided to keep its benchmark interest rate unchanged at a record low of 0.5% at the meeting earlier this month, amidst a backdrop of indications that the UK economy is recovering at a brisk pace. With the UK unemployment rate falling to 6.9%, below the7% specified in the central bank’s forward guidance as a threshold for considering tighter policy, it should make for interesting reading to see if the minutes contain any insights into how the committee views such changes and whether their outlook has altered.
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