Stocks carried through from Friday’s rally as the Dow gained another 222 points on lighter volume to close at 16,196. The support levels at 16k continue to show resilience as global stability prevailed over the course of the weekend. Consumer stocks lead the way higher today.
The spring housing market selling season kicked off yesterday but the big fly in the ointment is low inventory. According the National Association of Realtors, the supply of homes for sale is at its lowest point since the start of 2005. Back then home building was at a much higher level which helped ease supply issue. Meanwhile the Home Builders Association sentiment index fell 3 points to a reading of 58 which, while still healthy, was lower than expected. Builders are complaining about a lack of building lots and a tight labor supply.
According to a New York Times article, Smurfing (aka “money laundering”) is alive and well in China. Smurfing is a term used to describe the practice by Chinese companies and citizens of moving money out of China. As doubts arise over China’s economic prospects coupled with a falling yuan, an estimated $1 trillion has been taken out of China over the past year. The gubment has capital limits in place but people are finding ways around them like buying insurance policies that have cash value in dollars or buying a foreign company. While the PBOC works to sell US Treasuries to support the yuan, locals are converting the yuan to US treasuries, gold and other “stuff”.
WTI crude fell 1.3% to $29 on news that Saudi Arabia, Russia and Venezuela had reached an agreement on capping production. You would think oil would climb on the news but it fell because the deal did not include Iran and Iraq which are both increasing production with no sign of a slowdown. Gold fell 3% to trade near $1,201 per ounce as stability in global markets over the weekend calmed investor fears.