Mid-Day Recap: Stocks at 2009 Highs Heading Into Weekend
Equity markets areheading into the weekend on an optimistic note as modest gains have been extended after housing data bolstered sentiment and the Federal Reserve chairman said a global recovery was underway.
At 1:30, the benchmark S&P 500 was leading with a 1.66% gain 1,024 after hitting a 2009 high of 1,025. The Dow was up 1.48% to 9,488, and the Nasdaq followed a with a 1.28% gain to 2,014.
The main driver this morning was the 10:00 release of Existing Home Sales, which soared by 7.2% in the month, against expectations of just a 2.5% gain. Four consecutive months of gains have pushed the annualized pace of sales to 5.420 million, the highest rate in almost two years.
“The market for existing homes is up 17% since January because of improved affordability. Low mortgage rates, tumbling house prices and a tax credit for first-time homebuyers that expires November 30 are behind the sales increase,” said Patrick Newport from IHS Global Insight.
Single-family home sales climbed 6.5% in the month, while condo sales jumped 12.5%.
Regionally, the Northeast led the way with a 13.4% gain, while the Midwest saw a double-digit gain of 10.9%, and the South saw sales climb 7.1%. Only in the West were sales down, but the decline was a somewhat moderate 1.7%.
“A question mark is how much the first-time homebuyers tax credit is goosing the numbers,” added Newport. “Sales will take a hit once the credit expires. We do not have a good handle yet on how big this hit will be.”
As that data was released, Federal Reserve chairman Ben Bernanke delivered his fourth annual speech at the annual conference in Jackson Hole, Wyoming.
“After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good,” the chairman said in prepared remarks.
Bernanke was quick to point out at that improvement in the labor market may still be some time off, with “unemployment declining only gradually from high levels.” Most analysts believe the 9.4% unemployment rate will move into double-digits by early 2010.
In addition to reflecting on economic developments over the past year, Bernanke advocated increased regulation, but equity markets, which often sell off when such words are spoken, shrugged off the remarks.
Before the opening bell, market optimism had already been positive as reports from Europe came in with more results confirming a recovery was in the works.
In Europe, Germany’s Purchasing Manager Index hit its highest level in 12 months with a 49.0 reading, indicating that general conditions are just on the cusp of growth. The equivalent index from France climbed to a 15-month high of 50.2 in August, suggesting slight expansion. The two better-than-anticipated reports helped Euro zone manufacturing beat expectations with a score to 47.9.
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