Equity Index Update
Brad Sullivan
The index markets continued to show a tremendous amount of resiliency as early selling off the New Home Sales reading for February turned into a terrific buying opportunity. When the dust had settled, each index closed at their respective intraday highs in the CASH indices…however, heavy selling hit the futures market during the run session from 3:00 to 3:15 CDT and pushed each index significantly below their respective fair value readings. This morning, the indices are called to open moderately lower from those discounted closing readings, with the SP M7 trading down -1.50 at 1443.75. This would equate to a cash open of nearly -4.50. Keep a close eye on the programs as we move throughout the session as there will be many given the current disparity between the cash and futures.
Anyone want to buy a new house? Apparently not as new home sales plunged to 848,000 versus a consensus estimate of 985,000…a mere -14% below the estimates. In addition, the January reading was revised lower by -172,000 homes. Further, the inventory of unsold new homes shot to 8.1 months – a 16 year high. Accordingly, the indices plunged on this news as the SP M7 went from 1447 to 1433.50 within 45 minutes of the release of this report. However, the sell side could not build on this push and the market stabilized. Once the indices began to hold steady, around late morning, it became increasingly apparent that day traders were stuck short and players drove the bid increasingly higher. The key question remains whether or not yesterday’s rally from the lows was end of the quarter induced as funds try and mark positions higher…that may very well be the case, but, any way you slice it --- it was a pretty impressive bounce.
The index markets continued to show a tremendous amount of resiliency as early selling off the New Home Sales reading for February turned into a terrific buying opportunity. When the dust had settled, each index closed at their respective intraday highs in the CASH indices…however, heavy selling hit the futures market during the run session from 3:00 to 3:15 CDT and pushed each index significantly below their respective fair value readings. This morning, the indices are called to open moderately lower from those discounted closing readings, with the SP M7 trading down -1.50 at 1443.75. This would equate to a cash open of nearly -4.50. Keep a close eye on the programs as we move throughout the session as there will be many given the current disparity between the cash and futures.
Anyone want to buy a new house? Apparently not as new home sales plunged to 848,000 versus a consensus estimate of 985,000…a mere -14% below the estimates. In addition, the January reading was revised lower by -172,000 homes. Further, the inventory of unsold new homes shot to 8.1 months – a 16 year high. Accordingly, the indices plunged on this news as the SP M7 went from 1447 to 1433.50 within 45 minutes of the release of this report. However, the sell side could not build on this push and the market stabilized. Once the indices began to hold steady, around late morning, it became increasingly apparent that day traders were stuck short and players drove the bid increasingly higher. The key question remains whether or not yesterday’s rally from the lows was end of the quarter induced as funds try and mark positions higher…that may very well be the case, but, any way you slice it --- it was a pretty impressive bounce.
This morning will bring consumer confidence, but the main thrust of the markets collective focus will be squarely on FED Chair Bernanke's testimony on the Hill tomorrow on the state of the economy. In addition, with the end of Q1 upon us…it would seem plausible that we have not seen the near term highs just yet.
