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LIVE MARKETS-NAHB: Homebuilders take the K's high road

Mon, 19th Oct 2020 16:17

* Dow, S&P modestly lower, Nasdaq ~flat; small caps advance
* Comm svcs weakest major S&P sector; materials lead gainers
* Dollar dips; crude, gold gain; US 10Y T-note yield ~0.78%

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You
can share your thoughts with us at: markets.research@thomsonreuters.com

Homebuilder sentiment in the U.S. hit a record high this month, yet another sign that the
housing market continues its merry way along the upward trajectory of what many call a K-shaped
recovery from the pandemic recession, now trudging through its ninth month.
Homebuilders grew even rosier in October, according to the National Association of Home
Builder's (NAHB) Housing Market index (HMI).
The index edged two points higher to a reading of 85, beating the previous month's all-time
high of 83, where analysts expected it to hold steady.
An HMI number above 50 indicates optimism in the sector.
"Traffic remains high and record-low interest rates are keeping demand strong as the concept
of 'home' has taken on renewed importance for work, study and other purposes in the Covid era,"
said Chuck Fowke, chairman of NAHB.
Still, tight supply and rising materials costs remain headwinds for the sector.
"The outlook is positive for now, with some downside risks from rising prices that could
impact affordability as well as outbreaks that result in widespread shutdowns," writes Rubeela
Farooqi, chief U.S. economist at High Frequency Economics.
On Tuesday, the Commerce Department is due to release its housing starts and building
permits data for September, both of which are forecast to post nearly 3% gains.

Housing stocks, which outperformed the broader market leading up to the coronavirus crisis,
saw that relationship reverse in the first few months following mandated shutdowns.
But the sector is once again on top. The Philadelphia SE Housing index has been
outperforming the S&P 500 on a year-to-date basis for over a month now, as the chart
below illustrates:

The HGX and the S&P 1500 Home Builders index are both higher in morning
But all three major U.S. stock indexes retreated off early highs. The S&P and Dow
are now modestly red on the day, while the Nasdaq is roughly flat.

(Stephen Culp)

The Dow Industrials have kicked off the week in muted fashion. It's up just 0.1% on
the day.
Although early still, the blue-chip average is roughly flat on the day, but is on pace to
trade in its tightest weekly range as a percentage of the prior week's close since September
2017. Therefore, this holding pattern is not likely to last long.
Chart hurdles now stand at last week's high of 28,957.90, and the resistance line from the
February peak, which is now at about 29,065. The September high was at 29,199.35.
In any event, a thrust above 29,065 can suggest an important upward breakout is developing
that can suggest potential that the DJI will exceed its 29,568.67 all-time high. The log-scale
resistance line from the early 2018 high now comes in around 30,650.
Conversely, now that the Dow has seen 3 straight higher weekly troughs, a reversal below
last week's low at 28,181.54 can suggest a more sustained downturn may be developing. The rising
20-week moving average, which essentially contained September's weakness, now is at about
Meanwhile, of concern, weekly momentum has been lagging, suggesting the Dow may need to
quickly exit its short-term range to the upside. Else, it may soon collapse under its own

(Terence Gabriel)

Wall Street opened higher on Monday as optimism over the passage of a new round of fiscal
relief stoked investor risk appetite.
All three major U.S. stock indexes are in the green, with Nasdaq out front.
U.S. House Speaker Nancy Pelosi said on Sunday that although there remain a wide range of
differences with the White House, she was hopeful that a stimulus package could be passed before
the Nov. 3 election.
Shares of Boeing Co are up after American Airlines Group announced plans to
return the planemaker's grounded 737 MAX aircraft to service by the end of the year.

Oilfield services firm Halliburton Co reported its fourth straight quarterly loss
due to slumping oil prices and plunging demand for its services.
A busy week of quarterly reports lies ahead, International Business Machines Inc
results are expected after the bell.
Here is your opening snapshot:

(Stephen Culp)

For Monday's Live Markets' posts prior to 0915 EDT/1315 GMT click here:

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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