Markets Show Little Reaction to Home Sales Data

Markets brushed off US indicator releases this morning as data showed no significant strength while other forces including the looming possibility of a General Motors bankruptcy takes precedence in sentiment. The automaker announced that the deadline for its debt-for-equity exchange with bondholders has expired without success, adding further pressure that the June 1 deadline will result in chapter 11. Dow and S&P indices opened slightly off the previous close while the NASDAQ continued its dominance and has pushed into positive territory. Oil and other energy commodities are trading higher on prospects for demand while Treasuries also move higher as equities fail to rally higher following Tuesday’s large low-volume gains. Currency crosses to the US dollar are showing mixed movement as the Euro has fallen back 100 pips to 1.3903 while others including the Pound, Aussie and Canadian dollar are trading near recent highs.

[B]Existing Home Sales[/B] in the US rose in April by 2.9% from a fall of 3.4% in the previous month. Annualized sales meanwhile rose to 4.68 million from 4.55 million. Analysts polled by Bloomberg had expected the measures to rise by 2.0% on annualized sales of 4.66M. While the release is a positive one, it did not come as a significant shock to investors and markets show little upside following the release. Dwelling deeper into the release there are mixed signals on the future of the housing market. The median and average price of homes sold rose once again while the supply of existing homes rose to 10.2 months, the highest since November. Aso released this morning, the MBA Mortgage Applications Index continued its volatile trend last week with a fall of 14.2% following an increase of 2.3% in the previous week. The drop is partially attributed to a rise in the rates offered for mortgages which, while remaining relatively low, have begun to move closer to 5.0% on the 30-year rate.

The [B]House Price Index [/B]showed a surprising fall in prices for the month of March at 1.1%, following a revised gain of 0.2% in February. Analysts had expected the index to rise 0.2% but the decline has little significance as April and May data may show improvements. Looking deeper into the HPI, the drop breaks a two-month streak as all regions posted declines with prices in New England and Mountain regions falling more than two percent. Quarterly data for the House Price Purchase Index meanwhile came in lower by 0.55% following a drop of 3.29% in Q4.