Tuesdays economic calendar stirred things up in the majors. Two housing indicators, a consumer confidence survey and regional manufacturing report all hammered the dollar when traders realized that not one of the indicators met or beat its market consensus.
With the heavy-hitting data crossing the wires in bears favor, it didnt take long for the market to bring the dollar back to the brink of support. Already moving higher in the early morning hours, EURUSD surged to 1.3635 - just five points shy of the two-year high - after the disappointing data flow. In the same boat, USDCHF added to its declines to chalk up a 100-point and a double bottom on support seen around 1.2000/10. Though the dollar sell off was seen in GBPUSD, the pair held up its slowly descending trend channel with a reversal on 2.0045 resistance. Finally, the USDJPYs 118.25-119 range has proven itself quite resilient after a test on resistance in the London session, turned into a move on support in US liquidity.
Dollar bulls had no luck this morning. From a stacked docket, every single indicator that crossed the tapes in the early New York session managed to disappointment its respective consensus. From the flow, a theme clearly developed around the housing sector. Of the two housing numbers that crossed the wires, the most influential was that of existing sales for March from the National Association of Realtors. Prior to its official release, traders were prepared for a 4.3 percent drop, though this proved insufficient. According to the gauge, sales actually plunged 8.4 percent - the most in over 18 years - to a 6.12 million unit pace. Though a portion of this severe move can be associated with abnormal weather fluctuations, the trend is too clear to ignore. Ignoring the change for a second, the annual pace of sales is at a four-year low. This is more true to the persistent downtrend in the sector that is only further hurt as default rates rise with an effect on loan regulations and as home owners refuse to lower the selling price on their homes. According to component data from the sales report, the average price per transaction last month actually rose $3,400 to $263,500. On the other hand, the S&P/Chase-Schiller index suggests falling home prices in metro areas may lead a downtrend for the rest of the nation. The composite of 20 of the United States major metropolitan cities reported a 1.0 percent drop, topping Januarys 0.1 percent dip which was the first contraction since records began in 2001.
While housing data clearly stole the spotlight for dollar traders, there was more to worry about. The Conference Boards consumer sentiment survey for April depressed expectations that domestic spending would make up for any shortfall in the housing or manufacturing sectors. The confidence gauge posted a 104.0 print, which was a bigger dip than the market was prepared to deal with. This eight-month low was even more significant since it is no longer shifting at the whims of weather, but more deeply rooted trends. Higher gasoline and a rise in mortgage defaults is exposing the cracks in the consumers seemingly unshakable optimism and allowing expectations of softer employment and wage trends to filter through. The final indicator available for the day was the Richmond Fed index. The April factory activity gauge joined the Empire and Philly indicators in printing a small move that could revive fears that the manufacturing sector will once again drag growth. Altogether, todays calendar put a big dent in optimistic outlooks for the economy. Then why have major levels of dollar support not given way? With first quarter GDP due Friday morning, the market may be holding out for the more conclusive indicator before bigger moves are made.
Though todays macro data clearly dealt a considerable blow to equity markets bullish charge, reserved declines revealed traders were not ready to give up on the well-publicized 13,000-milestone in the Dow. In fact, by 15:00 GMT, the Dow was the only index still in the black with a modest advance to 12,922.81. At the same time, the S&P 500 was off its open by 0.34 percent at 1,475.95 while the NASDAQ Composite fell 0.37 percent to 2,514.27. While the other benchmark indices were spilling into the red, the Dow was propped by a few strong performances. Tech bellwether IBM put in its own 4.0 percent advance to $98.99 after the firm announced a $0.10 increase to its quarterly dividend and a $15 billion stock repurchasing plan. Elsewhere, chipmaker Texas Instruments reported a 12 percent drop in quarterly profit; though shares rose 8.0 percent to $35.00 on confirmation that business was improving after two quarterly declines in sales.
Treasury yields slipped modestly in the wake of the consumer sentiment and housing reports, suggesting traders are looking for more concrete growth numbers to influence their Fed outlooks. The 10-year note was quoted 7/32nds above the open at 100-03 by 15:00 GMT as its yield slipped 3 basis points to 4.612. Bonds rose 11/32nds to 99-07 while yields only fell 2 basis points to 4.799.