Stocks opened lower again this morning (Dow -75 pts; SPX -.40%). Healthcare, energy and materials sectors are all down more than 1% in early trading. The US dollar is a bit stronger against a basket of foreign currencies. Oil is falling again; now at $48/barrel. Piper Jaffray says technicals suggest oil will revisit its recent bottom at about $42/barrel, and then we’ll see if it resolved upward or downward from there. Bonds are higher on the day as yields fall. The 5-year Treasury is trading at 1.61%. I think there’s a sense on Wall Street that yields climbed too high in the first half of the year (5-year topped out at 1.79%), and that economic growth just isn’t strong enough to warrant all the fear of an imminent Fed rate hike. Yesterdasy on CNBC, Art Cashin of UBS said no one expects the Fed to raise short term interest rates at next week’s meeting. In fact, he thinks a Fed rate hike is unlikely this year. He sees a global slowdown putting the Fed on hold.
Caterpillar (CAT) reported a disappointing quarter and cut its full-year sales forecast. “While economic conditions in the United States are modestly positive, the global economy remains relatively stagnant,” said CEO Doug Oberhelman. “Many of the key industries we serve remain weak, and we haven’t seen sustained signs of improvement.”
Comcast (CMCSA) reported a decent quarter, with revenue growth of 11% (better than expected). According to Bloomberg, “The 20% gain in revenue at NBC Universal set the pace for the quarter and was led by the film studio and the theme parks.” The company has 22.5 million broadband subscribers and 22.5 million video subscribers. The number of new internet customers was down 12% y/y and fell short of Wall Street expectations. The stock was down modestly after the announcement yesterday.
Redfin says homebuyer demand is up 13% y/y, which is clearly good news. However, the same index fell 7% in June from prior month levels and this is causing a bit of panic. In fact, the Redfin CEO is calling for a fall-off in demand through the second half of the year. He says higher home prices have caused buyer fatigue and frustration. Median home prices are at record levels, suggesting we may be at a tipping point in terms of home affordability. This morning, we learned that new homes sales fell 6.8% in June from prior month levels. The volume of new home sales hit a 7-month low. This comes as a surprise to economists and investors, and is part of the reason the market is selling off.
MikesMarketUpdate 