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Two big positive surprises for stocks this morning but the market is having trouble, so far, in building on them
10/25/2010 3:04 pm EST
And then there’s bad news that’s good news for stocks: Like this weekend’s disappointingly vague agreement from the meeting of G20 finance ministers to avoid currency devaluations. No one believes that agreement will stop the current currency wars. So the U.S. dollar fell. And these days when the dollar falls stocks and commodity price climb.
Okay, back to a little more detail on both pieces of news.
The lowest mortgage rates on record and still-falling prices for existing homes (the median price is now down 2.4% from September 2009) drove September’s increase in sales of existing homes. Even with September’s increase, though, the current annual sales rate is still down 19% from this time in 2009.
The increase in sales took a bite out of inventory reducing the level by 1.9% to 4.04 million homes. At the current rate of sales it would take 10.7 months to clear that inventory. That’s an improvement from 12 months in August.
Distress sales—a category that includes foreclosures and short sales—made up a whopping 35% of all sales in September.
To move to the currency front, the dollar dropped against 15 of the 16 currencies in a basket of most-traded counterparts. The dollar fell to 80.58 yen. Remember the good old days when Japan intervened in the currency markets to defend the yen when it threatened 83 yen to the dollar? The euro climbed to $1.3973.
The U.S dollar is now down by 2.5% against its trading peers since August and most analysts expect that the decline will continue at least until the Federal Reserve announces the size of its second program of quantitative easing.
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