Markets tumbled as stocks fell the most in more than a month with the Dow falling triple digits and the volatility index, or VIX, rallying. Markets opened quietly, as they have done over the last few weeks, but an afternoon report from The Wall Street Journal that said Syrian warplanes bombed targets in western Iraq, seemed to give the market an initial push to the downside. The selling accelerated in the final hour of trade, and stocks closed just off their lows.
First, the scoreboard:
- Dow: 16,835.85, -101.4, (-0.6%)
- S&P 500: 1,951.67, -11, (-0.6%)
- Nasdaq: 4,352.76, -15.9, (-0.4%)
And now, the top stories of the day:
- Four economic data points were released this morning, headlined by the 20-city S&P Case-Shiller home price index, which showed that home prices rose 10.8% in April compared to last year. The increase was less than the 11.5% increase that was expected by economists, and month-over-month, housing prices rose just 0.19%. Following the report, Ian Shepherdson at Pantheon Macroeconomics noted that this was the smallest gain for the index since February 2012, but follows a 1.3% monthly increase in March, which was well above the prior trend.
- Also in housing data, new home sales surged 18.6% in May to an annualized rate of 504,000. The Census Bureau noted that report represents a supply of 4.5 months at the current sales rate. Cooper Howes at Barclays said, “While housing data largely disappointed in April relative to our expectations of a rebound following weather-related softness in Q1, the solid May prints in both new and existing home sales provide encouraging evidence that housing activity will end Q2 on a much stronger note.”
- The Conference Board’s consumer confidence index for June came in at 85.2, the index’s best reading since January 2008. Economists were expecting a reading of 83.5. The report also noted that consumers were more positive about the labour market, reporting that, “Those anticipating more jobs in the months ahead increased to 16.3 per cent from 15.2 per cent, while those anticipating fewer jobs edged down to 18.7 per cent from 18.9 per cent. Fewer consumers expect their incomes to grow, 15.9 per cent versus 18.0 per cent, but those expecting a drop in their incomes also declined, to 12.1 per cent from 14.5 per cent.” Pantheon Macro’s Ian Shepherdson said of the report, “In one line: A pleasant but modest surprise, with most of the action in the backward-looking component.”
- The Richmond Fed Manufacturing Index came in at 3 for May, below expectations for a reading of 7. “Retail sales fell and big-ticket sales slackened, while shopper traffic rose more slowly than in May,” the Fed said.
- Analysts at Credit Suisse this morning released a note that surveyed dealers of Caterpillar equipment, and the outlook was positive. From Credit Suisse: “Green Shoots Continue in US: For 2014, 95% of the dealers we surveyed are exceeding their forecasts, with the year now expected to be up 8-12% y/y versus 5-7% initially forecasted. Positive housing commentary was fairly broad-based, whereas non-residential is mixed but better on the margin. Dealers noted some signs of life in multi-family housing, automotive, hospitals, schools and data centres. Dealers also noted government spending has bottomed and energy in most cases remains solid, although mining is still dead.”
- The stock market in Dubai crashed overnight, closing down more than 6.5% after losing as much as 8% at one point. There was no exact catalyst identified for the crash, but BI’s Rob Wile noted that housing prices in Dubai have risen precipitously in the last year. The steep increase in housing prices lead the IMF to warn last month of, “unsustainable price dynamics and an eventual correction,” in the market.
- Volatility returned to the market — particularly late in the session — as the volatility index, or VIX, gained as much as 11% in late afternoon trade.
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