Stocks continued to rally after yesterday’s “Fed inspired” jump. The Dow tacked on 98 more points to 18,392. Trading volume was heavy in the morning but faded in the afternoon to close lower than yesterday’s level. IBD has changed its rating from “market under pressure” to “market in rally”.
Central banks around the globe are mostly in stimulus mode. Economist Klaus Baader of Societe Generale in Hong Kong stated that the lower pace of tightening by the Fed announced this week by Janet Yellen is allowing central banks in Japan, China and Europe to increase current monetary stimulus programs. Money is flowing from regions with negative rates to areas (US, Australia etc.) with positive interest rates. Investors are elated yet concerned because rising asset values in stocks, bonds and real-estate is happening instead of the central bank’s desired effects of 2% inflation, economic growth and wage gains.
The National Association of Realtors released August housing data and the numbers came in below estimates as existing home sales fell 0.9% to an annual rate of 5.33 million units. The NAR also reported the supply of existing homes fell 10% YOY and the median price of a home rose 5.1% from a year earllier to $240,200. Meanwhile homebuilder Lennar purchased small rival WCI Communities in a sign of industry consolidation. The outlook for housing remains good but not great.
Shares of Seattle based timber giant Weyerhaeuser shot higher after Goldman Sachs added the company to its “conviction buy list” saying that it was the only game in town (or in the woods for that matter) for owning the asset class formerly known as “timber”. Goldman said housing demand, affects of beattle kill and possible Canadian lumber tarrifs make owning US timber companies a compelling story. Ron the Logger cheered the news. Lumber futures have also recently rallied about 9% higher. I have not seen any news as to why they are suddenly higher but any comments would be appreciated.
Gold continues to rally on central bank easing. Gold finished at $1,341 up $9.80 per ounce.