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On Powell, Housing Supply and Helen of Troy Earnings
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Tuesday, July 9th, 2024
We enter a new pre-market trading day daintily. There are no winds in our sails from either direction at this hour — inflation data from CPI and PPI, along with Q2 reports at the foothills of a new earnings season, don't come out unitl later this week. It’s not stopping market indices from climbing still-higher following new all-time closing highs on the S&P 500 and Nasdaq yesterday. The S&P and Nasdaq are up +9 and +57 points, respectively. The Dow is +11 and the small-cap Russell 2000 is down -3 points.
The earliest we might see a change in market appetite is later this morning. That’s when Fed Chair Jerome Powell appears before the Senate Banking Committee, at 10am, to answer question regarding when interest rates might be expected to start coming down. Assuming there is no rate cut at the end of this month, it will mark a solid year at our current +5.25-5.50% Fed funds rate, which has kept things like bank loans more expensive, and applying downward pressure on inflation levels.
We see this policy’s effect most clearly in the housing market. This morning, we see increases in U.S. housing supply — with fewer sales than many in the industry had been predicting going back to the start of the year. With persistent +7% mortgage rates — +114% since the start of 2022 — we see housing supply higher, especially on the lower end of the spectrum. In fact, +42% of current supply is with homes sold for less than $500K. (Those over $1 million are not as beholden to mortgage-based buyers; many of these luxury home customers pay cash.)
One way to track housing is by counting the months a home is on the market. As of this latest report, existing homes stay for-sale an average of 3.7 months, while newly built homes last 9.3 months — more than double the length of time. As a result, newly built homes make up roughly 30% of overall homes for sale. Yet after all this downward pressure on the housing market, prices are showing strong resistance to coming down in price; even with persistently higher mortgage rates, we don’t see home prices being slashed.
Ahead of today’s open, Helen of Troy (HELE - Free Report) reported earnings. The parent company of household products like OXO, Braun and HydroFlask, among others, missed fiscal Q1 expectations by nearly -38% — earnings of 99 cents per share were short of the Zacks consensus $1.59 (and the $1.94 per share posted in the year-ago quarter). Shares are down -29% so far in today’s pre-market for the Zacks Rank #4 (Sell)-rated company, adding to the -26% selloff year to date. For more on HELE’s earnings, click here.
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On Powell, Housing Supply and Helen of Troy Earnings
Tuesday, July 9th, 2024
We enter a new pre-market trading day daintily. There are no winds in our sails from either direction at this hour — inflation data from CPI and PPI, along with Q2 reports at the foothills of a new earnings season, don't come out unitl later this week. It’s not stopping market indices from climbing still-higher following new all-time closing highs on the S&P 500 and Nasdaq yesterday. The S&P and Nasdaq are up +9 and +57 points, respectively. The Dow is +11 and the small-cap Russell 2000 is down -3 points.
The earliest we might see a change in market appetite is later this morning. That’s when Fed Chair Jerome Powell appears before the Senate Banking Committee, at 10am, to answer question regarding when interest rates might be expected to start coming down. Assuming there is no rate cut at the end of this month, it will mark a solid year at our current +5.25-5.50% Fed funds rate, which has kept things like bank loans more expensive, and applying downward pressure on inflation levels.
We see this policy’s effect most clearly in the housing market. This morning, we see increases in U.S. housing supply — with fewer sales than many in the industry had been predicting going back to the start of the year. With persistent +7% mortgage rates — +114% since the start of 2022 — we see housing supply higher, especially on the lower end of the spectrum. In fact, +42% of current supply is with homes sold for less than $500K. (Those over $1 million are not as beholden to mortgage-based buyers; many of these luxury home customers pay cash.)
One way to track housing is by counting the months a home is on the market. As of this latest report, existing homes stay for-sale an average of 3.7 months, while newly built homes last 9.3 months — more than double the length of time. As a result, newly built homes make up roughly 30% of overall homes for sale. Yet after all this downward pressure on the housing market, prices are showing strong resistance to coming down in price; even with persistently higher mortgage rates, we don’t see home prices being slashed.
Ahead of today’s open, Helen of Troy (HELE - Free Report) reported earnings. The parent company of household products like OXO, Braun and HydroFlask, among others, missed fiscal Q1 expectations by nearly -38% — earnings of 99 cents per share were short of the Zacks consensus $1.59 (and the $1.94 per share posted in the year-ago quarter). Shares are down -29% so far in today’s pre-market for the Zacks Rank #4 (Sell)-rated company, adding to the -26% selloff year to date. For more on HELE’s earnings, click here.
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