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Stocks decline amid falling home sales and rising durable goods orders

TradingPub Admin | January 28, 2013

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The ability of recently-released economic data to influence stock prices was once again displayed on January 28, when investors pushed U.S. equities lower amid news of falling sales for pre-owned homes and economic data pointing to higher durable goods orders. 

The blue-chip S&P 500 Index had a poor day in terms of performance, falling 0.2 percent to reach 1,500.25 at 4 p.m. in New York.

Bull market 

Although the group of stocks declined during the day, it came after the index surged in 2012 and then built on this improvement so far in January. 

The benchmark S&P 500 gained more than 13 percent in 2012, and has surged 5.2 percent so far this month. This rally represents the sharpest gains for the index during this part of the year since 1987, according to Bloomberg. 

Since reaching its recent low in March 2009, the S&P has surged more than 100 percent amid continued central bank stimulus and robust corporate earnings growth. At the time of report, the S&P 500 was approximately 4 percent short of its all-time of the all-time high of 1,565.15 reached in October 2007. 

Bullishness and speculation  

"The sentiment is really, really bullish," Barry James, who contributes to the management of $3.5 billion as president of James Investment Research, told the news source during a phone interview. "That is a little bit of a warning sign to us that we could be more in a topping phase than actually a new bull phase. It would take a lot to really convince everyone that happy days are here, and we can just ride this off into the sunset." 

J.J. Kinahan, chief derivatives strategist at TD Ameritrade mirrored this concern that stocks could drop in value, telling CNN Money that many investors do not want to trade at current values as they wait for a spate of labor data that is scheduled to be released later in the week. He told the news source that "people are reluctant to pull the trigger one way or the other until we get more clarity." 

Economic Data  

One piece of economic data that served to detract from the sentiment of investors was news provided by the National Association of Realtors that an index used to measure the sales of pre-owned homes declined 4.3 percent in December to reach 101.7. This result differed from the median forecast of market experts taking part in a Bloomberg poll, which predicted that the figure would not change during the month. 

However, global market participants had strong data to point to, as the Commerce Department indicated that orders for durable goods surged 4.6 percent in December. This figure was far above the median estimate of economists participating in a survey conducted by the media outlet, which predicted that this measure would rise 2 percent during the month. 

Earnings 

Investors continue to benefit from strong earnings, and Bloomberg data indicates that of the 150 S&P 500-listed companies that have released earnings so far this quarter, 75 percent have managed to surpass the predictions of market estimates, and 67 percent have surpassed projections for sales. 

Yahoo Inc., which has been drawing substantial visibility, announced that it earned $283 million during the fiscal fourth quarter, which bested the predictions of analysts and sent company shares up 5 percent, according to CNN Money. This batch of earnings was considered to be a crucial indicator of the effectiveness of company CEO Marissa Mayer. 

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