In US economic data, housing starts rose to 917,000 units in February from 910k the prior month. Building permits increase to 946,000 in Feb from 904k the prior month. So housing data continues to improve, and with housing being a big sector that should help support this fledgling economic recovery. With home prices firm, that also supports the wealth effect which ties into consumer spending. We are playing the housing trend via the home construction etf (ITB), which broke out to new highs today.
In Europe, the Cypriot parliament was expected to vote today, but it has been pushed back. The banks remain closed, and trading in their stock market has been suspended for two days. The country's president said that "parliament is destined to reject the bill."
Europe's markets are mixed today. Germany's ZEW economic sentiment survey came in slightly ahead of expectations at 48.5, but the Eurozone ZEW survey was well below consensus at just 33.4. Spain's bad loan ratio ticked up in January to 10.78% from 10.44%.
Asian markets were mixed to higher overnight. The Reserve Bank of India lowered its key rate 25 basis points to 7.50%. Australia monetary policy minutes left the door open to further rate cuts. And the People's Bank of China announced plans to drain 39 billion Yuan through short-term repo agreements (tightening monetary policy).
The dollar is flattish today, and commodities are mixed. Ag prices are higher, as are precious metals. Gold is trading up near $1611. Oil prices are slightly lower so far to $93.46.
The 10-year yield is easing back further, below its 50-day support to 1.91%.
And the VIX is another 2.5% higher to 13.70 after a big spike higher yesterday from its very low levels reached last week. The spike in the VIX should not be a surprise given how low it had gotten. All we needed was a small catalyst, and Cyrpus fit that bill. It will be interesting to see if it gets back around that 15 level that it spent several months at or if it continues to hover in this new lower trading range.
Trading comment: The S&P 500 has not had more than two consecutive down days so far this year. If it closes lower today that would mark the first such occurrence in 2013. So today is fairly important in that sense. It would be healthy for the market to continue to pull back and consolidate its recent gains. There are still lots of folks who feel they are underweight equities at this juncture and are waiting for such a pullback to get in. We have said that the market rarely accommodates the consensus wishes, so be alert for some twists in the script.
KAM Advisors has long positions in ITB
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