Like a mirror of yesterdays economic calendar, Wednesdays docket printed nothing but strong indicators - and yet the dollar was still pinned to its major support levels. If a strong durable goods report or substantial drop in existing home sales cant move the greenback from its relatively small ranges against the other G7 currencies, then Fridays GDP number could very well be the trigger that defines a new trend.
In the interim, price action in the majors is butting right up to major technical levels. In an anticlimactic move, EURUSD moved a few points above its all-time high to 1.3669, though a lack of conviction quickly found the pair falling back. At the same time, USDCHF skipped along support around 1.20, with a move to 1.2060 the only evidence that there are two sides to the market. Even the carry trade looks as if is on hold with USDJPY keeping its 118.25-119 range well intact. For GBPUSD, the disappointing US data from yesterday helped push the pair up to 2.0065, though there was no momentum as a double top formed initial resistance.
Though todays fundamental offerings didnt translate into the gratifying short-term bursts in price action that usually draws speculators, they did add to the debate of whether the US economy is heading towards a soft landing or recession. The key release for the morning was the Commerce Departments Durable Goods report for March. Headline bookings for goods that last three years or more grew 3.4 percent - more than expected. Optimism after the release was dampened somewhat when the transport complex was excluded from the calculation, leaving 1.5 percent growth for the month. By historical standards, the rise in orders was the largest in three months, but hardly a runaway advance. On the other hand, the component data was a little more promising for the economy. Non-defense capital goods orders excluding aircraft (an indicator of future business investment) rose 4.7 percent. This was the only increase for the quarter suggesting capital investment will not add to growth through the first three months of the year, though it may cue a rebound for the second quarter.
While investment isnt looking to contribute much to growth, housing is still expected to be a considerable detractor - despite todays data. This morning, March new home sales crossed the wires with a 2.6 percent increase to 858,000 units. This was the first improvement in three months, though it fell short of expectations and was easily dwarfed by the previous two monthly contractions. Whats more, the improvement is most likely linked to weather trends. After a month of much colder-than-average temperatures, the pickup through March drew potential buyers out into the market. While this is clearly important for month to month sales and construction activity, it is also a temporary and volatile condition. When the weather is no longer a factor, the bigger trend will be laid bare. As has been seen in recent numbers, this will likely be guided by increased requirements and regulations for loans and the slow decline in housing prices. In fact, the average price for new home sales actually rose $3,200 from February to $254,000 while year-over-year inflation accelerated to a 6.4 percent pace. Mortgage applications numbers are already adding credence to this outlook. The MBAs report printed the first increase in loan filings six weeks over the period ending April 20th. If this indicator cannot sustain a reliable rebound, there is little hope for sales and construction in the months ahead.
It has finally happened. The medias milestone 13,000 for the Dow has finally fallen, yet the bullish follow-through was limited as a more rational market looked to earnings and fundamentals for real support. By 15:05 GMT, the Dow and S&P 500 Indices were sharing the top-mover spot with 0.34 percent advances to 12,997.41 and 1,485.47 respectively. The tech-heavy NASDAQ Composite was dragging behind with a 0.21 percent rise to 2,529.75. Though it was trailing the other benchmarks, the NASDAQ also held some of the days biggest individual movers. Amazon.com led bulls with a 28 percent surge in sales that more than doubled profits over the quarter. Shares of the online retailer jumped 21.7 percent or 9.7 percent to $54.47. Not sharing in the same level of growth, Sun Microsystems reported fiscal third quarter earnings that came in below expectations. Sun shares responded to the disappointment with a 10.8 percent drop to $5.30. Another headliner was ABN Amro. It saw its per share value rise 4 percent to $49.28 after a consortium led by the Royal Bank of Scotland countered Barclays buyout bid with a $100 billion offer.
The bump in durable goods sales and couldnt rouse the same level of volatility in treasuries that yesterdays housing data did. The ten-year note was trading only 2/32nds lower at 99-31 after with a yield a basis point above the open at 4.828 by 15:05 GMT. Bonds were 5/32nds off at 98-30 as yields also rose a basis point to 4.816.