U.S. Indexes Soar 3% on Housing Data; Recrod Low Bond Yields

Bikram Pandey
20 Dec, 2011
New York City

U.S indexes soared 3% after home starts in November were ahead of expectations on a sharp increase in apartments building. Home builders, banks and consumer durables led the gainers. U.S. Treasury sold $35 billion of 5-year notes at a record low yield of 0.88%.

[R]4:35 PM New York – U.S indexes soared 3% after home starts in November were ahead of expectations on a sharp increase in apartments building. Home builders, banks and consumer durables led the gainers. U.S. Treasury sold $35 billion of 5-year notes at a record low yield of 0.88%. Metals and crude oil prices jumped more than 2%.[/R]

Stocks surged in New York trading responding to better than expected housing data.

Investors reacted strongly after seasonally annual housing starts in November rose 9% from October as builders’ ramp up apartment housing. The apartment construction surged 30% in the month from a year ago as families prefer to rent than own.

In addition, U.S. bond yields rose as fears of inflation drove the bond market sentiment. The U.S. Treasury sold $35 billion of 5-year notes at a record low rate of 0.88% with a bid-to-cover ratio of 2.85.

Market sentiment was positive from the start after the release of the housing data one hour before the market opening in New York. Moreover, the latest survey of business confidence in Germany indicated best monthly improvement this month since February.

However, the news from across the Atlantic was not all positive. Three private research institutes lowered their views on the German economy with two indicating near flat growth and one suggesting a mild recession.

But bond yields declined in European trading after Spain completed Treasury bill auction at a lower yield ahead of the European Central Bank tender offer tomorrow. Spain sold €5.64 billion of 3- and 6-month bills compared to Bank of Spain’s target of €4.5 billion.

Stocks in New York surged and popular indexes advanced more than 3% after housing starts soared in November. Home builders, consumer durables and banks led the gainers.

AT&T said it will pay $4 billion in breakup fee after it dropped its merger plan with T-Mobile USA and pursue roaming agreement with the fourth largest mobile carrier after the Justice Department blocked the deal.

On the earnings front, Red Hat revenues increased 23% and reported quarterly earnings of $38 million and CVS Caremark lifted its annual view and increased its quarterly dividend to 16.25 cents per share. General Mills said quarterly revenues increased 14% but earnings declined on higher ingredient costs.

The Nikkei index in Tokyo trading gained and defense contractors rose after Japan picked Lockheed Martin built stealth fighter as the main aircraft. IHI Corp and Mitsubishi Heavy will participate in production.

Australian stocks declined but cut losses after the latest central bank minutes of meetings confirmed the worries of global slowdown. Cochlear, the hearing implant maker soared 16% after it said it is prepared to return to market the recently recalled device. Four largest Australian banks are facing class action lawsuit of $200 million for alleged unlawful customer service fees.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond increased to 1.92% and 30-year bond inched up to 2.92%.

The U.S. dollar edged down 0.6% to $1.306 to one euro and traded lower against the Japanese yen to 77.85.

Immediate delivery futures of Texas crude oil increased $3.34 to $97.22 a barrel and futures of natural gas rose 4 cents to $3.14 per mbtu and gasoline price added 9.4 cents to 258.40 cents a gallon.

In metals trading, copper increased 7.2 cents to $3.38 per pound, gold added $18.60 to $1,615.30 per ounce and silver increased $0.67 to $29.54.