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While you were sleeping: Pending US home sales rise

Friday 27th April 2012

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Better-than-expected US housing data and a fresh wave of solid first-quarter earnings underpinned Wall Street.

Contracts to purchase previously owned American homes climbed 4.1 percent in March to the highest level since April 2010, the National Association of Realtors said

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.96 percent, the Standard & Poor's 500 Index rose 0.57 percent to 1,398.59 while the Nasdaq Composite Index advanced 0.73 percent.

Meanwhile, corporate America keeps reporting earnings that beat expectations. Of the 254 companies in the S&P 500 that have reported so far, more than 72 percent have exceeded forecasts, according to Thomson Reuters data.

While there were a few big disappointments today, they failed to alter the overall positive view of the earnings season. Shares of Exxon, Aetna and UPS all dropped today after their first-quarter results fell short of estimates.

"These are among the first blue chips to really miss this season, and that's putting some pressure on us," Timothy Hoyle, director of research at Haverford Investments in Radnor, Pennsylvania, told Reuters.

"I think earnings are enough to support a higher market, perhaps up to 1,450 (for the S&P 500), but the focus today is on who is and isn't delivering, compared to expectations."

Not all data delivered on the economic front either. US jobless claims declined to 388,000 from a revised 389,000 the prior week that was the highest since early January, Labor Department figures showed. Economists polled by Reuters had expected new claims to fall to 375,000.

"This was a disappointing number and offers more evidence that the labour market continues to lose traction," Joe Manimbo, an analyst at Western Union Business Solutions in Washington, told Reuters.

In Europe, the Stoxx 600 Index eked out a 0.1 percent advance for the day, helped by gains in car makers after earnings by Volkswagen and Volvo beat forecasts.

Automobile shares gained 2.7 percent for the biggest gain among the Stoxx 600 industry groups, according to Bloomberg.

However, the disconcerting news kept piling up too. An index of executive and consumer sentiment in the euro zone weakened to 92.8 from a revised 94.5 in March, the European Commission said. The decline was larger than economists had expected.

And Italy’s borrowing costs climbed at the sale of 8.5 billion euros of six-month bills, while Spain's rates rose as well after Prime Minister Mariano Rajoy said more austerity was needed to cover funding needs and avoid a financial rescue.

Concern about Europe's sovereign debt crisis is fueling the appeal of German debt, considered the region's safest. Germany’s cost to borrow for two years dropped to as low as 0.089 percent, almost the same yield as three-month Treasury bills, according to Bloomberg.

“The fall in German yields confirms that markets are becoming more nervous again,” Niels From, chief analyst at Nordea Bank in Copenhagen, told Bloomberg.

“The market is worried about the macroeconomic challenges in Spain. Euro-region sentiment surprised on the downside so that confirms that from a macroeconomic perspective nothing is improving in Europe.”


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