Title: Housing Market Woes Begin to Impact Stocks, Wolfe Research Warns
Date: [Current Date]
In recent news, Wolfe Research’s Chris Senyek has expressed concerns about the housing market, stating that its challenges are starting to put pressure on stocks. Senyek, a strategist at the firm, pointed out that the recent equity market drawdown has initiated a reversal of the “virtuous mini-cycle.” He further highlighted that extreme housing unaffordability is anticipated to significantly impact market sentiment.
These remarks followed the release of new home sales data by the Commerce Department, which failed to meet economists’ expectations. The housing market’s struggles are now becoming a cause for concern for investors and market analysts.
Moving on to the European markets, they opened on a muted note today. Investors are currently evaluating various factors such as inflation, interest rates, and the global economy’s overall health. The pan-European Stoxx 600 index experienced a minor decline of 0.1% during early trade. While some sectors showed marginal losses, others saw slight gains. Utilities stocks led minor losses with a 0.6% drop, while tech and oil and gas stocks recorded a 0.2% uptick.
In China, there seems to be a glimmer of hope for industrial profits. Although the first eight months of the year witnessed a double-digit drop in profits for industrial firms, the pace of decline slightly eased in August. The National Bureau of Statistics reported an 11.7% year-on-year fall in profits for August, compared to a 15.5% drop during the first seven months. This improvement follows a 17.2% year-on-year growth in August, which is the first monthly growth since the second half of 2022.
Meanwhile, the Bank of Japan (BOJ) showed internal divisions in its July meeting. The minutes revealed that the board members were split on when to raise interest rates. Despite inflation persistently exceeding the BOJ’s 2% target for 15 months at that time, a segment of the members advocated maintaining the negative interest rate policy and the yield curve control framework. However, another member believed that sustainable achievement of the 2% target was close and could be assessed in early 2023.
Shifting to Hong Kong, the city’s trade data for August showcased a slower rate of decline compared to the previous month. Imports fell by 0.3% year-on-year, while exports decreased by 3.7%, in contrast to July’s larger drops of 7.9% and 9.1%, respectively. Total trade in August amounted to 742.18 million Hong Kong dollars, experiencing a 2% year-on-year contraction.
In the United States, despite strong year-to-date gains for the Nasdaq Composite and S&P 500, the chief investment officer of Landsberg Bennett Private Wealth Management, Michael Landsberg, believes that corporate earnings need to recover for the market rally to broaden. Landsberg emphasized that the S&P 500 has witnessed three consecutive quarters of year-over-year decelerating earnings. He added that higher interest and money market rates intensify competition for stocks, further pressurizing the market.
Lastly, here are some notable after-hours stock moves from Tuesday. Costco shares fell nearly 2% despite reporting better-than-expected earnings and revenue for the previous quarter. MillerKnoll shares rallied 16.2% after outperforming analysts’ estimates but providing softer revenue guidance for the next quarter. AAR Corp, an aircraft services company, gained 2.4% after beating earnings and revenue forecasts for the first quarter of the 2024 fiscal year.
In summary, various factors, such as housing market issues, European market fluctuations, China’s industrial profits, the BOJ’s divided stance on interest rates, Hong Kong’s trade performance, and the outlook for corporate earnings, are currently shaping the global market landscape. Investors and analysts will closely monitor these developments as they seek insight for future investment decisions.