US Stocks Inch Higher On Housing; Europe Gains On Japanese Stimulus

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US stocks snapped a two-day mini-decline to finish slightly higher Wednesday after existing US home sales came in better than estimated while Japan announced additional monetary stimulus to boost a stagnating economy.

The indexes turned lower early on following a Commerce Department report that showed housing starts in August grew at 2.3 percent to an adjusted annual rate of 750,000, weaker than the expected 775,000 pace. Number of building permits was also weaker than estimated even though they showed robust growth over the same period last year.

Losses reversed later after a report from National Association of Realtors showed existing home sales for August rose 7.8 percent to an annual rate of 4.82 million on seasonally adjusted basis, bettering 4.6 million projected by Bloomberg.

The Dow Jones Industrial Average (DJIA) climbed 13 points while the S&P 500 Index (SPX) added 2 points with all but energy closing higher among its 10 business groups. Consumer discretionary led the day’s gainers.

Treasuries extended gains for the third straight day, clawing back most of the losses posted since the Federal Reserve announced further monetary easing last week, as investor’s remained apprehensive about the economy’s growth prospect despite the central bank’s recent efforts.

The benchmark 10-year Treasury yields fell three basis points to 1.78 percent, coming within sniffing distance of 1.76 percent, the pre-stimulus level seen on September 12.

Meanwhile, the US dollar slipped against major currencies as equities edged higher while the Japanese yen’s decline proved fleeting after Bank of Japan surprised markets by expanding its own assets purchase program by JPY 10 trillion ($12 billion).

Across the Atlantic, European stocks finished higher, boosted by BoJ’s sudden stimulus and solid US housing data. Reversing a two-day losing streak, the pan-European Stoxx Europe 600 index rose 0.4 percent.

After yesterday’s slump, oil firms rallied today, pushing stocks higher across Europe. Bank stocks also rose, helping bourses consolidate gains for the day. The DAX 30 index finished 0.6 percent higher in Frankfurt, helped by gains in Commerzbank AG and Deutsche Bank AG. The French CAC 40 index rose 0.5 percent while London’s FTSE 100 climbed 0.4 percent.

In the ETF space, homebuilder-linked funds outperformed after the housing sector showed signs of sustained recovery in August. The iShares Dow Jones US Home Construction Index Fund (ITB) surged 2.61 percent after its biggest holdings PulteGroup, DR Horton and Lennar Corp all added two and four percent.

ITB has soared a whopping 65 percent since January and has vaulted 103 percent over the past twelve months. The State Street SPDR Homebuilders ETF (XHB) added 1.74 percent for the day. XHB has grown 74.56 percent over the past twelve months and has added about 49 percent year-to-date.

The United States Oil Fund (USO) was among the biggest percentage decliners, crashing 4.08 percent as oil futures for October delivery slumped 3.5 percent after the weekly EIA report showed oil inventories were higher following a larger-than-expected supply increase.

Our Trend Tracking Indexes (TTIs) changed only slightly and will be updated in tomorrow night’s StatSheet.

Disclosure: No holdings

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