Before The Bell
The U.S. stock market sold off yesterday, as investors worried that the financial distress of a large real estate company in China could create problems elsewhere across the globe. In addition, calls to raise the debt ceiling from Treasury Secretary Janet Yellen have become a topic of debate in Washington. Meanwhile, it should be noted that up until recently the stock market has marched higher with little meaningful selling along the way. As a result, the current pullback should not come as a big surprise. Overnight, the international markets have been trading in a mixed fashion. In Asia, the Nikkei moved sharply lower. In Europe, the FTSE 100 has been pressing ahead. Meanwhile, on our shores, the S&P futures are up over 30 points, which indicates a constructive start to the session.
In economic news, the housing market will be in the spotlight much of this week. This morning, we get a look at housing starts and building permits for the month of August. Tomorrow, existing home sales will be released, followed by the new home sales figures at the end of the week. In addition, Wall Street will be keeping a close eye on the Federal Reserve over the next couple of days. Specifically, the FOMC will wrap up a two-day meeting tomorrow, and will issue an interest-rate decision along with some prepared remarks in the afternoon. Clearly, traders have been concerned about inflation lately, and are waiting to see if the central bank will tighten its policy. Some investors maintain that the economy has started to show signs of cooling and that may be taken into consideration.
In the corporate arena, the home builders have been in the news lately. Yesterday morning, D.R. Horton (DHI), a leading name in this industry, tempered its sales outlook due to supply and labor shortages. Later in the day, Lennar Corp. (LEN), which is another large company in the home building space, weighed in with a mixed report, and that stock is under some pressure in pre-market trading. Later this week, KB Home (KBH) will post its results. The outlook for home builders is of some importance, given that the real estate sector plays a sizable role in the broader economy.
Technically, the stock market has encountered significant selling during the month of September. Yesterday’s drop pushed the S&P 500 Index below it 50-day moving average, located at around the 4,435 mark. This area is widely watched by technicians and traders with near-term time horizons. It was encouraging to see some bargain hunters move in to buy equities late in the session yesterday. However, it remains to be seen if the bulls can mount an extended buying campaign at this point.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
