Weaker Home Sales, CP-KSU Deal for $25 Billion
We came into a new trading week mixed, with the Dow opening lower than Friday’s close but the Nasdaq and S&P 500 higher. We end the first trading day of the week up across the three major indexes — the Dow +0.32%, the S&P 500 +0.70% and the Nasdaq +1.23% — with the Russell 2000 closing 0.85% lower than the end of last week. That said, the small-cap index has still gained the most from its lows last March compared with its larger-cap counterparts.
Currently, we’re in a bit of a waiting period — between more economic data releases, Q1 earnings season in a couple weeks, and the impact from the massive stimulus program taking effect; those $1400 checks are bound to be spent somewhere. So in the meantime, it appears we are treading water amid the tepid good news that nothing — not even the 10-year note yield, which has stayed absolutely flat at 1.69% today — is spoiling the party at this stage.
We did see new Existing Home Sales numbers for February come out earlier today, which were lower than the 6.5 million expected and the 6.69 million reported from the previous month, to 6.22 million in this latest print. Demand is not the issue: with inventory reads at -29.5%, the lowest ever recorded, the obstacle in selling existing homes is all on the supply side. This has helped bump up the median home sales price to $313K, a five-year high.
Also, we see a major deal today in the Rail Transportation industry, with Canadian Pacific CP buying Kansas City Southern KSU for $25 billion in cash and stock, bringing together two major players in the North American rail space. Both segments have put up positive numbers year to date: Canada +6% and +3% in the U.S. Kansas City Southern is up 11.5% in today’s trading on the news, while Canadian Pacific has slipped 5.5% for the day.
Tomorrow brings us New Home Sales data for February, along with a new Current Account Deficit for Q4 2020. Seasonally adjusted, annualized new homes are expected to come in at 897K, down from the 923K reported for January. The deficit is expected to fall to -$187 billion from -$178.5 billion reported the previous quarter. This is taking things in the wrong direction, but still off the all-time low of -$218.4 billion we saw a little more than 14 years ago.
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