After a choppy afternoon of trading, the US dollar finished the day very little changed despite the release of extremely gloomy housing data. Existing home sales plummeted 8.0 percent to 5.04 million during the month of September - the lowest reading since the National Association of Realtors started keeping records in 1999.
Single family home sales fared the worst, as they declined 8.6 percent from the month prior, while condo/coop sales fell 4.3 percent as tighter lending standards and higher mortgage rates make it more difficult to get financing. Meanwhile, supply levels rocketed to 10.5 months while the median price on total existing home sales dropped to $211,700 from $224,400. With inventory levels growing and demand clearly waning, it appears that prices will continue to fall much lower. While the greenback didn’t necessarily take the news to heart, fixed income traders apparently did as Fed fund futures now price in an 86 percent chance of a 25 basis point cut on October 31st. Though this is slightly lower than yesterday, futures are also starting to price in a 14 percent chance of a 50 basis point cut at the end of the month as it becomes clear just how dire the housing situation has become, especially in regards to its detrimental effects on the US economy. The New Home Sales release on Thursday will likely reinforce that sentiment, as the index is predicted to plummet 3.1 percent to 770K. However, dismal news from the hosuing sector will not be entirely surprising to the markets and as a result, traders may focus more on the Durable Goods Orders release instead. The headline figure is predicted to improve 1.5 percent and will likely be buoyed by the transportation component, as Boeing reported that orders picked up to 132 in September from 75 during the month prior. Excluding this factor, durable goods orders may only rise a more tepid 0.7 percent, but any surprisingly strong figures could prove beneficial for the Dow, while the US Dollar may continue to be plagued by Fed rate cut speculation.