U.S. stocks enjoyed another nice session yesterday, just about recouping last week’s losses, on the bet that Greece will pass the austerity measure that’s supposedly the requirement to getting that EU/IMF bailout funding.

In reality, it probably doesn’t matter if the austerity vote passes or not – although it likely will be an ultra-slim margin – because everyone now understands that the EU banking system can’t withstand the risk of technical default (the IMF will hand the money over no matter what).  After that, the market will have to deal with the ultimate issue:  Greece will be unable to pay its obligations for a long time and if the continent fails to find a growth solution then Spitalian debt woes will take the funding problems to another level.

Energy shares shot up to lead the rally.  Consumer staples was the worst-performing sector.

The Dollar Index fell for a second-straight session as it resides at a very low historical level: the greenback is up from even deeper lows hit in early May but still very depressed -- and worse against the Swiss Franc, which is the fiat currency equivalent of gold, as the dollar hit a new low against that currency.

Commodities rallied, led by the prices of sugar, coffee, gasoline and wheat.  Gasoline rallied eight cents to $2.88/gal -- $3.54 at the pump.

The worst Treasury auction ($35B in 5 yrs) in a while had its effect on yields as the longer-end of the curve shot up 10 basis points.  Of course, since yields were at obscenely low levels already it means the 10-year rate sits at only 3.08%.

Market Activity for June 28, 2011

Sector Activity for June 28, 2011

CaseShiller Home Price Index

The CaseShiller HPI for April showed that home price reversed an eight-month slide to tick higher by 0.66%.  This is a three-month average so the February and March decline adversely affected this number; prices were probably up a decent amount in April, but they should be after another round of lower prices and it being the buying season.  That’s for the unadjusted measure; the seasonally adjusted measure slipped 0.09% (basically flat) for the 10^th month of decline but seasonal adjustments have been rendered useless due to government stimulus measures.

The year-over-year decline came in at 3.96% for April (largest y/o/y decline in 17 months), down from the 3.77% in March but the three-month annualized figure improved markedly to -5.35% from -11.83% in March.  Nineteen of the 20 cities tracked posted a y/o/y decline in April.

Just seven cities posted monthly price declines in April, which is nearly half the number of the previous month (12 posted prices declines in March).  From the peak, six of the 20 cities posted new lows, up from 13 in March.

As we talked about last month, expect to see a slight increase for May and probably June as well as these figures will removed the horrible results of February and March and the seasonal buying season will help sales (a meaningful drop in rates should help just a bit too).  But housing will remain mired for sometime as there are just too many distressed properties that will be hitting the market and economic growth is insufficient to foster the job growth we need.

Consumer Confidence

The Conference Board’s consumer confidence survey (the longest running and broadest population sample of consumer sentiment) fell for a second-straight month in June.  The measure came in at 58.5 (lowest level since November) after the 61.7 in May that was down from 66.0 in April.  This measure is a relative value index with an index base of 100 set in 1985.

Both the current conditions and expectations (the view of finances six months out) surveys fell as the former sits at past-recession lows and the latter about mid range of past recessions (and lowest since October).

The jobs “plentiful” less job “hard to get” measure fell to -38.6% as 5.2% of respondents believed that jobs were plentiful (down from 5.7% in May) and 48.8% believed jobs were hard to get (up from 43.5% in May).  The cycle low is -45.8% and the all-time low of -58.7% was hit in 1982.

Richmond Fed

The third regional survey of the major regional manufacturing surveys we’ve seen for June improved and actually posted a positive reading.  The Richmond Fed survey rose nine points to a reading of +3 from the -6 printed for May.  This is the first of the three to report that activity expanded during June after the New York and Philly regions posted meaningful contractions.

But the internals of the report weren’t all that encouraging as new order were just barely positive with a print of +1 (but up strong but from a deep -15 in May); backlog of orders remained ugly at -16 (up from -19 in May); and the average workweek fell to -5 from 0 in May.

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Have a great day!

Brent Vondera, Senior Analyst

Phone: 636-449-4900