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Briefing.com Summary:
*Rising bond yield and rising oil prices are keeping buyers sidelined for now.
*Semiconductor stocks, yesterday's leaders, are today's more notable laggards.
*Housing starts were decidedly weak in July, with declines across all regions.
There has been a reversal in fortune for the stock market so far this week, with increased attention to rising bond yields (globally) and oil prices.
Both are in focus this morning, with reports highlighting the highest yield for Japan's 10-yr note (2.954%) in more than 40 years, the highest yield for Germany's 30-yr bund (3.779%) in 15 years, the highest yield for France's 10-yr OAT (4.11%) since 2008, and the highest yield for the U.S.'s 30-yr bond (5.33%) since 2007.
Those moves are running alongside higher oil prices, driven by concerns that the U.S. and Iran remain in a stalemate with peace talks, which in turn is keeping traffic through the Strait of Hormuz stymied. WTI crude futures are up 0.8% to $85.13/bbl, and Brent crude futures are up 0.3% to $91.14/bbl.
These elements have the equity futures market under wraps, as it also contends with a momentum swing in the semiconductor stocks. Yesterday, semiconductor stocks formed one of the few winning groups. Today, they are on their heels. The VanEck Semiconductor ETF (SMH) is down 3.3% in pre-market trading without a specific news catalyst to account for the abrupt turn.
Currently, the S&P 500 futures are down 33 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 383 points and are trading 1.2% below fair value, and the Dow Jones Industrial Average futures are down 35 points and are trading fractionally below fair value.
Home Depot (HD), which reported better-than-expected fiscal Q2 results and reaffirmed its FY27 guidance, is doing what it can to provide some offsetting support. It is up 2.2% ahead of the open; however, it has not escaped the broader market's attention that the company said customers are still on the sidelines with large do-it-yourself purchases and that it is operating in "frozen housing market" conditions.
Right on cue, it was reported this morning that housing starts declined 12.4% month-over-month in July to a seasonally adjusted annual rate of 1.239 million (Briefing.com consensus: 1.360 million). Single-unit starts were down in every region of the country. Building permits increased 5.0% month-over-month to a seasonally adjusted annual rate of 1.443 million (Briefing.com consensus: 1.390 million). The good news there is that permits for single units—a leading indicator—were up 2.5% month-over-month.
The key takeaway from the report, though, is the broad-based weakness in single-unit starts seen in July, which is a month that featured rising interest rates that increased the cost of financing.
Separately, the import-export price index for July showed import prices down 0.4% month-over-month but up 0.4%, excluding fuel. Export prices dropped 1.3% month-over-month and were down 1.5%, excluding agricultural products. The rub is that year-over-year increases continue to be outsized.
On that score, import prices were up 5.9% and up 4.5%, excluding fuel. Export prices were up 8.2% and up 8.5%, excluding agricultural products.
That might help explain why Treasury yields didn't deflate in a noticeable way following the weak housing starts data and the seemingly market-friendly drop in monthly import and export prices.
The 2-yr note yield is up two basis points to 4.20%, and the 10-yr note yield is up one basis point to 4.74%, roughly where they were before the data were released.
