Both the S&P 500 and the Nasdaq indexes rose on Monday as an increase in 10-year note yields raised financial sector stocks and investors anticipated continued strength in corporate earnings and domestic economic growth.
The financial sector index rose 1.3 percent after 10-year Treasury note yields climbed to their highest level in five weeks. The Federal Reserve will likely continue to raise interest rates despite criticism from President Donald Trump.
The consensus now is for profit growth of about 22 percent for the second-quarter earnings season, up from 20.7 percent at the start of the month, according to Thomson Reuters I/B/E/S.
News of ongoing trade talks helped the equity markets edge upward. Mexican President-elect Andres Manuel Lopez Obrador sent Trump a letter urging a quick wrap-up of NAFTA trade negotiations, and trade officials from Mexico and the United States will meet later this week.
Also, European Commission President Jean-Claude Juncker is scheduled to meet with Trump on Wednesday over the imposition of import tariffs, though he will not arrive in Washington with a specific trade offer.
Yet, there is concern regarding the effects of international trade tensions on the dollar, which has climbed in recent months. Several multinationals are reevaluating their currency hedging strategies.
Shares of Illinois Tool Works fell 7.2 percent, contributing to the S&P 500 industrial sector’s index falling 0.6 percent. The machinery parts maker cut its full-year earnings forecast, joining Netflix in blaming the strong dollar for the cut.
Amazon fell 0.6 percent and was the largest drag on the Nasdaq and the S&P 500 after Trump renewed his attacks on the retailer.
Shares of Alphabet rose more than 4.0 percent in after-hours trading after the company reported quarterly earnings.
Hasbro rose 12.9 percent, the most of any stock in the S&P 500, after posting upbeat results. Rival Mattel Inc gained 3.9 percent.
Tesla fell 3.3 percent after a report that the company has asked some suppliers to refund previous payments by the company in a bid to turn a profit.
Shares of Halliburton closed out the trading day down 8.1 percent due to concern over rising pipeline constraints in the Permian Basin.
LifePoint Health was up 35.5 percent and lifted shares of hospital operators after the company agreed to be bought by Apollo Global Management in a deal valued at about $5.6 billion.
Approximately 5.50 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.16 billion share average over the past 20 trading days.
Existing Home Sales Down Unexpectedly
Existing home sales fell unexpectedly during June, posting their third straight monthly drop as a persistent shortage of properties on the market drove house prices to a record high, likely sidelining some potential buyers.
The National Association of Realtors reported on Monday that existing home sales fell 0.6 percent to a seasonally adjusted annual rate of 5.38 million units during June. May’s sales pace was revised down to 5.41 million units from the previously reported 5.43 million units.
Sales rose in the Northeast and Midwest but fell in the West and populous South.
Existing home sales, which make up about 90 percent of all home sales, fell 2.2 percent from a year ago in June. They have declined on a year-over-year basis for four consecutive months and decreased 2.2 percent in the first half of 2018.
Sales are hindered by an acute shortage of homes on the market. Rising building materials costs as well as shortages of land and labor have left builders unable to bridge the inventory gap, pushing up house prices.
Supply constraints have largely accounted for the sluggish housing market but there are growing concerns that the higher house prices together with rising mortgage rates will slow down demand.
The median price of a home increased 5.2 percent from a year ago to an all-time high of $276,900 in June. That was the 76th consecutive month of year-on-year price gains. In contrast, annual wage growth has remained below 3 percent.
Supply is especially tight at the lower end of the market, with sales down 18 percent in June from a year ago.
There were 1.95 million previously owned homes on the market in June, up 4.3 percent from May. Inventory increased 0.5 percent in June from a year ago. That was the first year-on-year increase since June 2015. Supply remains tight.
At June’s sales pace, it would take 4.3 months to exhaust the current inventory, up from 4.1 months in May. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
While last month’s increase in the stock of houses on the market suggested that the inventory decline had probably run its course, the supply crunch is unlikely to improve soon.
The Commerce Department reported last week that new housing starts fell 12.3 percent to a rate of 1.173 million units in June, the lowest level in nine months. That number was well below the 1.5 million to 1.6 million units per month range needed to alleviate the shortage.
Permits for future home construction also fell as did the stock of houses under construction.
Houses for sale typically stayed on the market for 26 days in June, unchanged from the last three months and down from 28 days a year ago. Fifty-eight percent of homes sold in June were on the market for less than a month.
First-time buyers accounted for 31 percent of transactions in June, unchanged from May and down from 32 percent in June 2017. Approximately 40 percent share of first-time buyers are needed to maintain a healthy housing market.