Insights

2:30 p.m. Market Update:   Dow +118, S&P +15, Nasdaq +19

On the 8:30 a.m. release of Durable Goods Orders and the Unemployment report futures jumped on a higher than expected Durables Goods Orders increase of 1.9% with the expected increase being 0.5% – good news.

The unemployment number came in pretty much as expected but the bad news there is people are still losing their jobs with the continuing claims for unemployment insurance jumping 110,000 to 6.79 million.  The question here is whether market participants are looking for ‘less bad’ numbers or if all the positive hope for an economic and market bottom, coupled with the past months solid run up in the market, starts to get buyers hungry for real actually ‘good’ news.  Another 110,000 people on unemployment insurance and the highest level of people on the handout since 1982 is not ‘good’ news.

The Durable Goods Order increase above what was expected trumped the unemployment numbers and we saw a solid open with the Dow jumping 88 points in the first 5 minutes but then started to sag.  At 10 a.m. the New Home Sales numbers hit the tape and the markets sold off hard thereafter.

356,000 new home sales was the previous number with 360,000 expected today and the number came in at 352,000.  Going down!

As everyone knows the health of housing is at the bedrock of our economic problems today and, even though existing sales came in solid at up 2.9% month-over-month yesterday, reflecting slightly improving conditions, the fact that home prices fell 19.1% year-over-year in the first quarter at a record pace does not inspire many buyers.

The Housing number tanked the market from the Dow up 80+ to down over 40 but a rally back into positive ground and then up to positive 50 points plus and subsequently trading back into negative territory but lo and behold the Treasury Bond sale today was decently received – not even a great auction – and the market fires back up.  Get the idea no one has any idea what to do?

Big news on a new search engine from Microsoft (BING), AOL getting kicked out of Time Warner, a GM deal (finally) and now Google has a big new thing called ‘Wave’ has this market Ping Ponging all over so place your bets – its going to be some ride today.

Four Ballgames;

1)  Durable Goods sold a little more which might be pent up demand.  Are people just replacing that worn out dishwasher or are they upgrading to a better one or buying one for the second house?

2)  Jobs are still being lost and that is bad no matter how you slice it or explain it away.

3)  Home sales are languishing and prices are dropping at a record pace.  Can you say ‘upside down mortgage?’

4)  One in Eight Americans are now behind in paying their mortgage.  Put this together with the fact that over 8% of us are out of work and that puts the economy behind the 8-ball.

Plug in yesterdays Treasury market plunge which raises interest rates and therefore makes homes less affordable (hey – the way prices are cratering just wait, that house is going on sale AGAIN next week) and the core problem of this whole mess – housing – is still not looking very rosy and neither is this economy.