In my post yesterday I noted that the rebound in US housing looks increasingly tenuous in the face of the continuing turmoil in the bond markets.
Yields of 10 US Treasury Notes has rebounded strongly during the past few days. Yesterday, 10 year yields recaptured the 26 levels
The result of yesterday’s bond market sell-off?
The US largest residential house builder, DR Horton (DHI) fell off the cliff, down by 8.58%!
This comes even amidst a reported “better-than-expected profit” for the second quarter of 2013. Good “past” news didn’t deter the selloffs on the prospects of sustained elevated higher mortgage rates.
Rising yields also smacked Pulte Homes (PHM) largest homebuilding company hard. PHM essentially collapsed—down by 10.3%!
Lennar Corporation (LEN) the second largest homebuilder has had a better fortune yesterday. The bulk of the early steep losses was recovered. Nonetheless LEN still posted a 1.62% loss.
(charts above from stockcharts.com)
These has important implications
During the 2003-2007 boom phase of the US stock market, the housing downturn preceded the collapse of the S&P 500 by about a year. This has been manifested by the decline in the stock price of DR Horton DHI (leftmost arrow) and eventually the S&P 500 (second or middle arrow).
The same story holds true with Pulte Homes (PHM).
(charts from bigcharts.com)
As in 2006-2007 boom phase, US stock markets may continue to rise, but if the recent downshift in US homebuilders should deepen or intensify, prompted by higher mortgage rates, the lessons of the 2008 US mortgage crisis tells us that such widening divergences would likely spell the Wile E Coyote moment for US stocks in the fullness of time.
Interesting times indeed.
Risk-On, ONN, turned to Risk-Off, OFF, as is seen in the former trading lower, and the latter trading higher, as Japanese Banks, MFG, SMFG, NMR, and Far East Financials, FEFN, traded lower, turning the Nikkei, NKY, and Sony, SNE, Tool Manufacturer, MKTAY, lower, as Japanese Bonds traded lower, as their inverse, JGBS, traded higher, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened, as is seen in the Steepner ETF, STPP, steepening, thus documenting the failure of Kuroda Abenomics.
ReplyDeleteIt is Jesus Christ working in The Economy of God, specifically Dispensation, Ephesians, 1:10, to pivot the world out of Liberalism’s Age of Investment Choice, and into Authoritarianism’s Age of Diktat, by enabling bond vigilantes to call interest rates higher globally, brining forth debt deflation, terminating Inflationism, and starting Destructionism.
US Homebuilders, ITB, fell 3.2%, as Home Improvement Stores, HD, LL, LOW, traded lower.
US Infrastructure, PKB, traded 1.0% lower, as the following traded lower,
Industrial Textile Manufacturer, MHK,
Packaging and Container Manufacturer, GPK
Lumber Producer, LPX
Cement Manufacturer, EXP
Contractors, EME,
Building Material Providers, MAS, USG
Appliance Manufacturers, WHR, LII
Home Furninshing And Fixture Provider, FBHS
Specialty Retailer, TSCO
Business Services, CTAS
Producers MHK, GPK, LPX, EXP, EME, MAS, and USG, have been US Infrastructure, PKB, leaders.
Appliance Manufacturers, WHR, and LII, have been Global Industrial, FXR, leaders.
Home Furnishing and Fixture Provider, FBHS, and Specialty Retailer, TSCO, have been Small Cap Pure Value, RZV, leaders.
Workplace Uniform Provider, CTAS, has been a Business Services, BUSE, leader.
The disconnect between Eurozone stock values and economic conditions grew even greater today. Despite Charles Gave of GaveKal writing in Zero Hedge, Southern Europe walks on thin air, European Banks, SAN, IRE, DB, continued rallying, taking Emerging Market Financials, EMFN, European Financials, EUFN, Netherlands, EWN, Ireland, EIRL, France, EWQ, Germany, EWG, Spain, EWP, Italy, EWI, and Europe, EZU, with its ADRs, seen in this Finviz Screener, to new rally highs. Sweden, EWD, rose to a new rally high, Norway, NORW, and Poland, EPOL, rose strongly.
The strong rally in all of the Euro, FXE, centric Nation Investments, EWN, EIRL, EWG, EWQ, EWP, EWI, seen in their combined ongoing Yahoo Finance Chart, and the trade lower in the US Dollar, $USD, UUP, establishes the crack up boom nature of Liberalism’s grand finale boom-bust business cycle that comes via leveraged speculative investment choices under the interventionist world central banks’ monetary policies of easing, in front of next week’s US Federal Reserve policy meeting.
It has been Jesus Christ, operating at the helm of the Economy of God, specifically Dispensation, presented in Ephesians 1:10, producing a moral hazard based prosperity, that has created Liberalism’s Peak Wealth, seen in World Stocks, VT, the S&P 500, SPY, and Global Industrial Producers, FXR, Automobiles, CARZ, and Small Cap Pure Value Stocks, RZV, to name just a few, trading up to and then lower from their recent highs.
It is the interest rate sensitive stocks, ITB, XLU, DBU, REM, ROOF, REZ, FNIO, IYR, and DRW, and the Emerging Markets, EEM, EMFN, EMIF, EMMT, and Mining Stocks, PICK, REMX, KOL, COPX, and Growth Stocks, SLX, that have traded lower since May 21, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, rose to 2.01%, which literally destroyed Nation Investment, EFA, and IFSM, in countries such as ARGT, EPU, ECH, EWZ, INP, EZA, TUR, EWW, CHII, seen in their combined ongoing Yahoo Finance Chart, as well as in Asia Excluding Japan, EPP, FXI, EWA, THD, IDX, EPHE, ENZL, seen in their combined ongoing Yahoo Finance Chart.