ECONOMIC WATCHDOG, Jan. 25
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January 25, 2007
Economic news took a negative turn during the past few sessions, mostly dealing with the housing sector. On Wednesday, weekly mortgage applications fell sharply, followed by an unexpected decline in existing home sales on Thursday. However, jobs data was mixed with jobless claims rising, but the help wanted index rising sharply. The other information released on Wednesday was the weekly inventory data for crude.
On Wednesday, crude prices soared after weekly inventory data showed a rise of 800,000 barrels. At the same time, distillate stocks were up 400,000 barrels and gasoline reserves rose 4.0 million barrels. An announcement by the Energy Department that they would like to more than double the strategic reserve in the next 10 years sent oil above $55 a barrel. On Thursday, profit taking took place, sending crude down $1.14 to $54.23.
The only other economic data on Wednesday was the weekly mortgage applications data. This report showed that applications fell 8.4 percent for the week ending Jan. 19 to 402.7. The fact that mortgage rates are inching higher has eased refinances, which fell 9.6 percent. This news didn’t garner much attention as traders awaited the existing and home sales data due out on Thursday and Friday.
Existing home sales in December fell by 0.8 percent to an annualized level of 6.22 million units. This was 30,000 below expectations, but is still consistent with the formation of a bottom in the housing sector. Overall, existing home sales fell 8.4 percent to a total of 6.48 million units from 2005’s level of 7.075 million units. New homes sales for December are expected to show a mild rise to 1.05 million units from 1.047 million in November.
Jobless claims for the week ending Jan. 20 rose by 36,000 to a level of 325K. This was well above expectations for a reading closer to 310K. However, continuing claims did fall by 39,000 for the week ending Jan. 13. Jobless claims tend to be rather volatile from week to week, which makes the four-week moving average a better measure. This moving average saw a rise of just 1,500 during the week to 309,250.
The help wanted index showed strength in December, rising to 33 from 29. This index measures help wanted ads in 51 major newspapers across the country. Though this data can still provide some insight into the jobs market, more attention is now put on the Monster Employment Index, which measures online job ads.
Besides new home sales data due out Friday, traders will also get the durable goods orders release. Expectations are for orders to rise 3.0 percent in December after rising 1.6 percent in November. The year on year rate was flat in November after seeing 15 percent growth in September. This data is also very volatile, with traders more interested in durable goods orders that exclude transportation.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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