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Today in stocks: S&P 500 erases earlier gains as bond yields rise
Worries about the consequences of an Iranian attack on Israel have eased, bringing attention back to the earnings season and the risk of inflation in favor of a rate cut.
A closely watched housing sentiment index snapped a four-month winning streak on Monday, sending homebuilder stocks lower amid high interest rates on mortgage-resistant loans.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) remained at 51 in April, unchanged from March. To be sure, any number above 50 suggests that more builders think market conditions are good than bad.
"The flat reading in April suggests that the potential for demand growth is there, but buyers are hesitant until they can better judge interest rates going bonkers," Robert Dietz, NAHB's chief mat economist, said in a statement.
Lennar (LEN), Pulte (PHM) and Toll Brothers (TOL) were all down more than 11 TP3T at midday, while the SPDR S&P Homebuilders ETF (XHB) was down 0.31 TP3T.
The muted confidence among builders underscores the fact that many potential buyers and sellers have been holding back in the face of high prices and limited housing stock. The news comes after last week's higher-than-expected inflation data prompted investors to trim the number of rate cuts this year to two, below the median of three expected by the Fed at its March meeting.
"Markets are now adjusting to slightly higher interest rates due to recent inflationary readings and we continue to expect the Fed to announce a rate cut later this year, with resisted lending rates moderating in the second half of 2024," said Dietz.
Interest rates on resisted loans rose slightly compared to the beginning of the year, forcing borrowers to wait and see as the spring home-buying season gets underway. Freddie Mac reported that the average 30-year fixed mortgage rate rose to 6.881 TP3T, up from 6.821 TP3T the week before.
In April, builders were a little less aggressive in lowering prices, with 22% of builders reporting lower prices, down from 24% in March and 36% in December of last year.
At the same time, the proportion of sales incentives utilized declined from 60% in March to 57% in April.
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