While you were sleeping: Stocks hold near highs

Tuesday 1st July 2014

Wall Street was mixed as a better-than-expected report on US home sales and a weaker-than-anticipated one on manufacturing provided little incentive to push stocks already trading near record highs.

The National Association of Realtors said its pending home sales index jumped 6.1 percent, the biggest increase since April 2010.

Lawrence Yun, NAR chief economist, said he expects improving home sales in the second half of the year. “Sales should exceed an annual pace of five million homes in some of the upcoming months behind favourable mortgage rates, more inventory and improved job creation,” Yun said in a statement. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”

Separately, the Chicago ISM manufacturing index declined more than expected to 62.6 in June, from 65.5 in May.

In the final hour of trading in New York, the Standard & Poor’s 500 Index gained 0.13 percent, while the Nasdaq Composite Index rose 0.37 percent. The Dow Jones Industrial Average slipped 0.08 percent as gains in shares of Verizon and Boeing offset declines in shares of Visa and Walt Disney.

“Stocks are still the only game in the town,” Jim Kee, president and chief economist of San Antonio-based South Texas Money Management, told Bloomberg News. “Pullbacks possibly, but ultimately stocks will keep grinding higher.”

The S&P 500 last traded at 1,963.54.

“We still think a move into the 1,980-2,000 level is possible, but it will not be a huge surprise if 1,950 is revisited multiple times as we move through the summer months," Todd Salamone, senior vice president of research at Schaeffer's Investment Research in Cincinnati, Ohio, told Reuters.

Meanwhile, San Francisco Federal Reserve President John Williams said the central bank won’t raise its benchmark interest rate “for some time”. Last week St Louis Fed President James Bullard rattled markets saying the US economy was performing much better than most realised, predicting the Fed would lift its key by the end of in the first quarter of 2015.

“I am aware that not everyone is a fan of the Fed or of accommodative policy,” Williams said in a speech in Sun Valley, Idaho, on Monday. “But the bottom line is, it has worked. And the asterisk is that it’s not permanent. We won’t raise interest rates for some time, which is the real marker of tightening policy.”

He later told reporters that a rate hike would not be appropriate until the second half of 2015, Reuters reported.

“I see real GDP growth averaging a bit above 3 percent in 2015 and 2016, which should be enough to generate relatively strong job growth,” Williams said. “I expect the unemployment rate to gradually decline, hitting about 6 percent at the end of this year, falling below 5.5 percent by the end of next year, and reaching my estimate of the natural rate by the first half of 2016.”

In Europe, the Stoxx 600 Index edged lower to finish the session at 341.86. The UK’s FTSE 100 fell 0.2 percent, while France’s CAC 40 declined 0.3 percent. Germany’s DAX added 0.2 percent.

A report showed German retail sales posted a surprise drop of 0.6 percent in May.

A deal between US authorities and French bank BNP Paribas is expected to be announced within days. Reports suggest the bank will have to pay as much as US$9 billion in penalties and lose the ability to do some business in the US.

BusinessDesk.co.nz

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