U.S. stocks tore higher yesterday, bringing the S&P 500 within 1% of its 32-month high hit on February 18, after a number of profit reports beat expectations Tuesday night and Wednesday morning – Intel, IBM, Yahoo, United Technologies all killed it.  Problem is most of this growth is occurring overseas, particularly emerging market economies that are now in the process of tightening policy, and our GDP figures aren’t benefitting. 

Then last night Apple crushed their number, but what has it really meant for economic growth.  Apple’s been destroying their own guidance and analysts’ estimates for eight years now, yet real GDP has grown at a pathetic 1.5% annualized rate.  One wonders how many of the 45 million Americans currently on food stamps will wait in the grocery line this week, talking on their iPhones just before whipping out the good ol’ EBT card.  Or the percentage of the eight million Americans currently on unemployment benefits that will be playing ZombieSmash on their iPads later today.  But the market doesn’t want to be concerned with such gilded realities right now.

Tech, energy and consumer discretionary shares led yesterday’s rally.  Financials and telecoms were the laggards, but all of the 10 major industry groups did close higher. 

The greenback continues to get Bernanked (it is the wildly aggressive monetary policy that’s crushing the $) as it slides to the 73 handle on the Dollar Index this morning.  The all-time low is 71.40; that record low occurred in early 2008 as the Fed was pushing fed funds swiftly lower after their move to normalize rates caused the housing and leverage bubbles to burst. 

The CRB Index jumped (within 1% of the post-crisis high hit on April 8) as it was driven by the prices of precious and industrial metals, the energy complex (crude back to $112/bbl), corn, hogs and OJ. 

Market Activity for April 20, 2011

Sector Activity for April 20, 2011

Mortgage Apps

The Mortgage Bankers Association reported that its applications index rose 5.3% for the week ended April 15 as purchases drove the reading higher. 

Applications to purchase a home rose 10.0% after the previous week’s 4.7% decline and refinancing activity increased 2.7% after the previous week’s 7.7% slide.  The average contract rate on the 30-year fixed mortgage fell 15 basis points to 4.83%.

The 10% rise in purchase apps were helped by a 17.5% jump in FHA apps as borrowers get in before the insurance premiums go up next week.

Existing Home Sales

The National Association of Realtors (NAR) reported that previously-owned home sales rose 3.7% in March to 5.10 million at a seasonally-adjusted annual rate (SAAR) – beating expectations for a 2.5% increase.  The February results were revised up to show sales fell 8.9% instead of the 9.6% slide initially reported last month. 

Single family unit sales, which account for 87% of all existing-home sales, rose 4.0% to 4.45 million SAAR after falling 8.9% in February.  That’s not a bad level (just 7% below the 15-year average), it’s just woefully inadequate relative to the supply glut out there. 

Distressed properties accounted for 40% of existing-home sales last month and cash transactions accounted for 35% of sales – according to NAR’s chief economist, “home sales are strongest in the very-low price range” (less than $100,000). 

The supply figures were mixed as the months’ worth of supply (at the current sales pace) ticked down to 8.4… 

…while the official number of previously-owned homes available for sale rose 50,000 to 3.549 million. 

On top of this official number of previously-owned homes available for sale is the backlog of properties that will continue to hit the market over the next 12-18 months as the foreclosure process has been delayed. 

To wit, there’s another 4.3 million homes that are 90 days late or already in the foreclosure process, which more than doubles the official number.  In addition, there are 3.5 million mortgages that have received modifications (and the re-default rate is running at 50%); there’s another 12 million properties in which the mortgage is underwater, many of which will strategically default.  These numbers are provided by CoreLogic.   Know these figures and you get the sense that it will be a long time before housing bounces back. 

The median price of an existing home rose 2.2% for the month to $159,600 from $156,100.  That’s down 5.9% over the past 12 months and 31% from the peak hit in July 2006.

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Have a great day!

Brent Vondera, Senior Analyst

Phone: 636-449-4900