While Waiting for Yellen Interesting Data Points Appear

Two key releases of data are the true underlying fundamentals driving markets today. Certainly another little upward bump in the price of oil has helped stimulate U.S. equities, but it is the data that really counts.

Upon reconsidering the likelihood of a rate rise, the dollar took back most of its losses on the day. That took the steam out of gold and silver’s strength. The two metals are slightly in the red on the day.

U.S. equities traded in positive territory on the day. Although it did pull back, the NASDAQ touched a record high, 5275. Europe was very strong on the performance of banking, mining and materials stocks.

Now, about that data itself…

New U.S. single-family home sales rose vigorously in July, reaching their highest level in nearly nine years. Demand increased broadly, brightening the longer-term housing outlook.

New home sales surged 12.4% to a seasonally adjusted annual rate of 654,000 units last month, the highest level since long ago and faraway in October 2007.

Sales were up 31.3% from a year ago.

There are a few important drivers of this data. The Millennial Generation has finally entered the chute of prime first-house buying years, 27 to 40 years of age. New home sales are likely benefiting from a chronic shortage of previously owned houses available for sale. Wages are rising as the labor market tightens. People feel more confident.

This is the sort of bedrock economic activity that could push the Fed into a rate rise fairly soon. But every silver lining has its cloud.

In a report, market research group Markit said its flash Purchasing Managers’ Index (PMI) dropped to 52.1 in August from the prior month’s final reading of 52.9. Experts expected a lesser decrease to 52.7 this month.

It’s important to note that this is one of the indices that reckons any number over 50 as an expansion while any number under 50 shows contraction. So, U.S. industrial output is expanding at a very good clip, though not quite as strongly as the previous month’s gauge showed. Within the report, we saw that exports grew significantly more quickly.

“The August drop in the PMI is a disappointment but less worrying when looked at in the context of July’s better than expected reading,” Markit chief economist Chris Williamson noted.

“Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter, and should help drive stronger GDP growth,” he added.

There was a significant aviso. 

“Policymakers will therefore be pleased to see signs that the economy may have picked up speed in the third quarter, but the Fed looks unlikely to tighten policy again until the upturn has stronger foundations, suggesting any interest rate rise looks unlikely before December,” Williamson concluded.

Let’s see what perverse reactions Fed members have to this latest data release.

Wishing you as always, good trading,