US markets closed higher on upbeat new-home sales data

24 Aug 2016 Evaluate

The US markets closed higher on Tuesday, reacting to upbeat data on US new-home sales and a stronger-than-expected gauge of European private-sector activity. The Nasdaq Composite briefly hit an all-time intraday high, while the S&P 500 flirted with its own intraday record. Both the S&P 500 and Nasdaq had traded at levels that would have given them new closing highs, but fell short by the close. Investors also were playing a waiting game ahead of a retreat of Federal Reserve members and economists at Jackson Hole, Wyo., on Friday, where Chairwoman Janet Yellen will be watched for hints about US monetary policy. Even so, the probability of a rate hike this year climbed somewhat. The market is pricing in a 24% probability of a rate increase in September, up from a previous 18%; and a 54% chance of it happening in December, up from a previous 52%, according to CME’s Fed Watch Tool.

On the economy front, US new-home sales surged to the highest in nearly eight years in July as builders picked up the pace while buyer demand remained robust. Sales of newly constructed homes rose 12.4% to a seasonally adjusted annual rate of 654,000. That was 31.3% higher than a year ago, and easily beat forecasts of a 581,000 pace. June’s figure was revised downward slightly, to 582,000. The median sales price in July was $294,600, 0.5% lower than year-ago levels. As sales soared, supply dwindled to 4.3 months’ worth of homes at the current pace.

However, a reading of manufacturing sentiment was softer in August after hitting its highest level in nine months in July. The flash manufacturing purchasing managers index from Markit fell to a reading of 52.1 this month from 52.9 in July. While output showed a solid increase in August, slower growth in total new work and employment, along with further cuts in inventories, dampened the overall headline.

The Dow Jones Industrial Average added 17.88 points or 0.10 percent to 18,547.30, Nasdaq was up 15.48 points or 0.30 percent to 5,260.08, while S&P 500 gained 4.26 points or 0.20 percent to 2,186.90.

The Indian ADRs closed mostly in green; Infosys was up 0.74%, Dr. Reddy’s Lab was up 0.44%, HDFC Bank was up 0.31% and Wipro was up 0.09%. On the other hand, Tata Motors was down 0.18%.

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