U.S. stocks rallied on Tuesday, for no apparent reason really.  The day’s economic releases were ugly, not that that matters right now, and EU peripheral-economy credit spreads widened (heading back to record wides) -- even the credit rating agencies acknowledge that these governments will restructured debt, if not in the very near term by 2013 when the EU bailout fund essentially forces investors to take a haircut. 

But we are two days from quarter end, and since this will mark the six out of the last seven quarters in which stock prices ramp higher, mutual fund managers want to look like they were fully invested, or even overweight equities.  That is, the negative developments don’t seem to matter.  Volume has been as close to nonexistent as it gets for past three sessions.

Telecoms, energy, basic materials and utilities led the advance.  Financial, consumer staples and tech were the laggards but all 10 major industry groups did close higher for the session. 

The CRB Index slipped for a second-straight session but is pretty much holding at the post crisis high.  Live cattle prices hit at least a 30-year high yesterday.  The prices of crude and wholesale gasoline also rose as the two commodities reversed a couple sessions of weakness.  Crude closed at $104.72/barrel and gasoline at $3.05/gallon – retail gasoline hit a national average of $3.59. 

Market Activity for March 29, 2011

Sector Activity for March 29, 2011

CaseShiller Home Price Index

The CaseShiller HPI (CS) for January mirrored what the other housing gauges have illustrated; housing is in double-dip as prices are staging their second round of decline and making new post-bubble lows during what is the worst housing recession since the 1930s. 

On a seasonally-adjusted basis the CS index measured prices dropped 0.22% (seventh-straight month of decline), which was actually better than the -0.44% expected and less than the 0.39% decline in December.  Twelve of the 20 cities tracked posted declines. 

On an unadjusted basis prices fell 1.04% (sixth-straight month of decline).  Nineteen of the 20 cities tracked posted declines for January; 18 of the 20 cities posted year-over-year declines; and 11 of the 20 cities hit new cycle lows (Atlanta, Charlotte, Chicago, Detroit, Vegas, Miami, NY, Phoenix, Portland, Seattle and Tampa). 

So this CS index works with a significant lag as this latest report is on January prices.  Since the National Association of Realtors’ gauge of existing-home prices and the Commerce Department’s gauge of new-home prices both showed big declines in February, I guess we can expect the same from CS. 

In addition, each monthly reading for CS is a three-month average so this latest figure includes the November data, which showed a respite from the double dip as prices ticked higher for that month.  Thus, February should show a particularly harsh move down as it will include three-straight months of large price declines.

Consumer Confidence

The Conference Board’s gauge of consumer confidence (the longest running confidence survey) showed significant deterioration in March, led by the expectations side of the survey as higher energy and food prices clearly have consumers concerned about rising costs. 

The headline reading slid 8.6 points to a reading of 63.4, which wipes out the February print that had the measure hitting the 70 handle for the first time since Bear Stearns went down in March 2008. 

The present situation held up well considering the way the expectations index behaved, actually rising three points to 36.9 – although it remains at deep historically lows. 

The expectations reading got hammered by 16 points, coming in at 81.1 for March.  All of the sub-indices regarding consumer expectations six months out (business conditions, employment, income, auto purchases, home purchases and major appliance purchases) decline. 

The 12-month inflation expectation jumped to 6.7% from 5.6% in February. 

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Have a great day!

Brent Vondera, Senior Analyst

Phone: 636-449-4900