The major domestic equity indexes closed out a low-volume trading session little change on Monday. The largest gains were attributed to the energy sector as investors appeared to be remaining on the sidelines ahead of quarterly earnings.
Later this week some of the largest S&P 500 companies, including Boeing, Amazon and Facebook, report first-quarter results. Additional reports could ease investor fears of an earnings recession.
Trading volume – which was the lowest so far in 2019 – was also muted by the fact that some on the Street remained on vacation after Friday’s market holiday, while Monday saw markets were closed in parts of Europe and Asia.
Earnings for the S&P 500 companies are expected to decline by about 1percent year-over-year, according to Refinitiv data, in what would be the first earnings contraction since 2016.
However, more than three-quarters of 82 S&P 500 companies that have reported so far have surpassed beaten-down expectations.
With the S&P trading at less than 1 percent below its record high reached in September, the Street appears to be also waiting for upcoming data such as first-quarter GDP before making larger bets.
The S&P energy index rose 2.1 percent in its largest one-day percentage gain since January, as oil prices surged on the United States’ move to further clampdown on Iranian oil exports, tightening global supplies.
But seven of the 11 major S&P sectors ended the day lower, led by a 1 percent decline in the real estate index.
Intuitive Surgical Inc fell 7 percent and was the largest drag on the S&P 500 after the surgical robotics maker’s quarterly earnings number missed consensus estimates.
Kimberly-Clark gained 5.4 percent, touching a near two-year high, after the consumer products maker reported better-than-expected earnings.
The PHLX Housing index fell 0.97 percent after data showed U.S. home sales fell more than expected in March, pointing to continued weakness in the housing market.
Approximately 5.79 billion shares changed hands on the major domestic equity exchanges, a number that was lower than the 6.65 billion share average for the last 20 trading days.
Existing Home Sales Decline
Existing home sales fell more than expected in March as rising demand stoked by declining mortgage rates and slowing house price inflation continued to be frustrated by a lack of properties, especially in the lower-priced segment of the market.
The report from the National Association of Realtors (NAR) on Monday could temper expectations of a strong spring selling season that had been bolstered by a recent surge in applications for loans to buy homes. The housing market continues to buck the broader economy, which has shown signs of gaining momentum after stumbling at the turn of the year.
Existing home sales fell 4.9 percent to a seasonally adjusted annual rate of 5.21 million units last month. February’s sales pace was revised down to 5.48 million units from the previously reported 5.51 million units. Sales fell in all four regions of the country.
Making up about 90 percent of all home sales, existing home sales declined 5.4 percent from a year ago. That was the 13th straight year-on-year decrease in home sales. As a result, housing is likely to remain a drag on gross domestic product in the first quarter. Residential investment contracted in 2018, chalking up its weakest performance since 2010.
While lower borrowing costs and house prices as well as strengthening wage growth have improved affordability, land and labor shortages are making it difficult for builders to ramp up construction of relatively cheaper priced homes.
The 30-year fixed mortgage rate has dropped from a peak of about 4.94 percent in November to around 4.12 percent, according to data from mortgage finance agency Freddie Mac. Applications for loans to purchase a home jumped to an almost nine-year high in the week ending April 12.
A survey last week showed that while builders reported strong demand for new homes in April, they also complained about “affordability concerns stemming from a chronic shortage of construction workers and buildable lots.”
There were steep declines in sales in the lower and upper ends of the market last month. The NAR said last year’s revamp of the tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was hurting sales of homes priced $1 million and above.
The supply of previously owned homes on the market rose to 1.68 million last month from 1.63 million in February and 1.64 million a year ago. At March’s sales pace, it would take 3.9 months to exhaust the current inventory, up from 3.6 months in February.
A six-to-seven-month supply is viewed as a healthy balance between supply and demand. The median existing house price increased 3.8 percent from a year ago to $259,400 in March.
The Commerce Department reported last Friday that housing starts dropped to a rate of 1.139 million units in March, the lowest level since May 2017.
That was the second straight monthly drop in homebuilding and pushed starts substantially below the 1.5 million to 1.6 million units per month range that realtors estimate is needed to alleviate the shortage.
Houses for sale typically stayed on the market for 36 days in March, down from 44 days in February, but up from 30 days a year ago. About 47 percent of homes sold in March were on the market for less than a month.
First-time buyers accounted for a third of sales last month, little changed from February and up from 30 percent a year ago. Approximately a 40 percent share of first-time buyers is needed for a robust housing market.