Stocks Leap As Real Estate Market Jumps

Meanwhile, another detail not included in this headline was that mortgage defaults are skyrocketing! So much for the health of the housing market!

But the Dow closed over 500 points today!

Stocks Rise As Housing Market Collapses

It's a good thing stocks are rising, or I would have thought the economy was collapsing!

Pending Home Sales Show Solid Gains

It's a Bad Hair Day in the Financial Markets. Time for a Wake-Up Call!

The news is almost universally bad today. After the market rallied powerfully to erase a 150-point Dow loss yesterday, today the news is bad, bad, bad.

Home sales are down 7 months in a row! Case/Shiller is tanking!

The Baltic Dry Index continues to tank!

Chicago PMI was down, surprising the market to the downside!

The U.S. is on the verge of sharp job losses, according to Art Cashin!
From Art Cashin UBS Financial Services:
Disappointing Jobs - While everyone seems to debating what the non-farm payroll numb will be Friday, a few are looking toward the annual revisions in the much debated Birth/Death model.
As you probably recall, it does not refer to the birth or death of humans. The badly named model refers to the birth and death of businesses. Each January the BLS revises the number, usually vaporizing thousands of jobs.
We were going to try and calculate the likely revision, but our sharp-eyed friend over at Bloomberg, Rich Yamarone, as usual, beat us to it. Here’s what he wrote in his Notepad column recently:

The Net Birth/Death (NBD) statistic adjustment – an adjustment the BLS uses to account for job creation or loss with respect to births and deaths of businesses – is always the weakest during January. Over the last five years the NBD for January has averaged -335k. [January 2011: -339k, January 2010: -427k, January2009: -356k, January 2008: -378k, January2007: -175k.]

The CBO says the real unemployment rate is 10%!
"Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent"- translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%. 

The latest "treaty" out of Europe leave much to be desired, despite that Euro-zone countries are going to be required to give up most of their sovereignty.

Retail sales in Germany are slumping.

Europe data shows almost certain recession in the area with the largest GDP in the world.

National Association of Liars

I wonder if they'll revise GDP lower accordingly. I doubt it!

Foreclosures Rising Again

LOS ANGELES (AP) -- Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.
The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.
The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.
"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."

Case Shiller Declines, Stocks Rise

More Bad News

But stocks are rallying now!

from Zero Hedge:

And so the double dip confirmation resumes, with the Richmond Fed printing at -10, the lowest since June 2009, well below consensus of -5, a collapse from June's -1, and the lowest since June 2009. From the report: "In August, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — declined nine points to -10 from July's reading of -1. Among the index's components, shipments lost sixteen points to -17, and new orders dropped six points to finish at -11, while the jobs index inched down three points to 1." And more: "Other indicators also suggested additional softening. The index for capacity utilization declined eight points to -14 and the backlogs of orders fell seven points to end at -25. Additionally, the delivery times index moved down twelve points to end at -4, while our gauges for inventories were virtually unchanged in August. The finished goods inventory index held steady at 17 in August, while the raw materials inventories index added one point to finish at 19." And the final nail in the economic coffin was New Home Sales which came at 298K, down from 312K upward revised prior, and missing the consensus of 310k: the lowest in 5 months. "Housing data over the past three months indicates that there is little appetite in the consumer sector to take on the risk of purchasing a home at a time when prices are likely to decline further,’’ says Bloomberg economist Joseph Brusuelas. As Bank Of America (RIP) said yesterday, one false word out of Beranke on Friday, and we will see what could possibly be the most epic market crash ever. For those wondering why stocks surged on this horrible news: look no further than the central planners in the Marriner Eccles building who are now expected to do "the right thing" for stocks.

Richmond Fed Disappoints, New Home Sales Decline

How could new home sales decline in June?

But it looks like stocks may be putting in a bottom!

from Zero Hedge:

Another set of ugly economic data to add to the earlier Case Shiller miss: the Richmond Fed officially contracted despite expectations of a rise from 3 to 5, dropping to -1. This means that the recent rebound from negative to positive and back to negative is indicative there is something far more broken with the economy than just a transitory soft patch. New home sales also deteriorated dropping from 315K to 312K, on expectations of a rebound to 320K. The median sales price was $235,200, and the average $269,000, on 6.3 months of supply. As Joseph Brusuelas of Bloomberg said, "Nothing in data suggests any turnaround." Yet the irony is that the end consumer: the entity that is getting pounded daily by this administration and the oligarchy, just became more confident, with the number beating consensus of 56 and printing at 59.5... on Hopium! Yes, the current conditions declined from 36.6 to 35.7, but at least American have managed to revert to their standard optimistic outlook, and the six month outlook surged from 71.6 to 75.4. Hilarious. Nonetheless unlike before when this goalseeked data point would have been enough to set off a massive buying spree by the HFT algos, today it is insufficient, and following the relentless barrage of bad economic data ES just took out overnight lows.

More Bad News, So Wake Up, Wall Street!

Another day of bad news, with the Dow down about 80 so far:

Case/Shiller hits lowest level since November 2009

Existing Home Sales Miss, Cancellations Rise

from Zero Hedge:

According to the NAR, June existing home sales once again declined, this time to 4.77MM from 4.81MM, the lowest since November, and well below the expected rise to 4.90MM. This number was 8.8% below June 2010's 5.23MM. Total inventory increased by 3.3% to 3.77 million units, or 9.5 months of supply at the current sales rate up from 9.1 in May. The biggest question mark is the surge in order cancellations which soared from 4% in May to an unprecedented 16% in June. That's one in five home transactions being cancelled in the middle of the deal.

Home Builder Sentiment Declines

"After holding at a low but steady level for the past six months, builder confidence in the market for newly built, single-family homes declined three points in June to a reading of 13 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The last time the index was this low was in September of 2010. "Builders are being squeezed by the continuing weakness in existing-home prices – against which they must compete -- as well as rising material costs," said NAHB Chairman Bob Nielsen

Case Shiller Plumbs New Recession Lows, and Stocks Rise

"This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.

Explanation from Goldman Sachs on Today's Dour Economic Data

I find it interesting that they blame Japan's woes for the Philly drop, but admit that they have no data to back it up.  This brings to five the plethora of bad economic news today. I'm amazed that the Dow isn't down 200 points!

Goldman Sachs on today's bad economic data:

1. The Philadelphia Fed's monthly manufacturing survey weakened sharply for the second month in a row. The headline index of "general business activity" fell to 3.9, from 18.5 in April and 43.4 in March. This still suggests factory sector growth, but only barely. Most of the detailed activity indexes also weakened - the new orders index fell to 5.4 from 18.8, the shipments index to 6.5 from 29.1, and the unfilled orders index to -7.8 from 12.9 - with the exception of employment, which rose to 22.1 from 12.3 in April. (We have no information on how much of the drop in the Philly survey over the past two months could have been related to supply chain issues associated with the Japanese earthquake, but this is not a region with an especially high concentration of vehicle manufacturing.) Price pressures eased a little but remain high in historical terms.

2. Existing home sales declined by 0.8% mom in April to an annualized rate of 5.05 million units. Consensus forecasts had expected a moderate increase. Home sales dropped in three of the four Census regions during the month, with the largest declines in the Northeast. The number of homes currently offered for sales was about unchanged after seasonal adjustment, at about 3.7 million units (the months supply of homes increased, but this was likely due to seasonal variation). The median sales price of existing homes increased by about 0.5% mom on a seasonally-adjusted basis-an encouraging turn after several months of weakness. Existing home sales prices are down 5% year-over-year.

3. Rounding out the weaker-than-expected data, the index of leading economic indicators fell by 0.3% mom in April. The consensus had expected a 0.1% inc

More Slowdown Chatter

Will they be talking "double dip" again soon?

also from the WSJ:

By Dave Kansas

Lots of slowdown signals in the market this morning, boosted by the brutal housing data and the weak industrial production news.
In the stock market, the headline averages aren’t moving a great deal — The Dow Jones Industrial Average is off 0.4% — but a clear divergence between cyclical stocks and defensive stocks is clear, with cyclicals stocks down and defensive shares holding or gaining ground.
The Treasury market is echoing that divergence, with the benchmark 10-year bond up about 1/4, and its yield, which moves in the opposite direction, down at 3.115%. Bonds tend to rally on whiffs of economic sluggishness.

Housing Gets Worse

But there is another iteration of the Pollyanna party today. Stocks are rising for now.

from Zero Hedge:

Since the triple dip in housing was recently circumvented courtesy of QE2, and was "transitory" in theory today's subpar housing starts and permits data is the beginning of the quadruple dip. And subpar it was: starts came at 523K on expectations of 569K, down from revised 585K previously. Permits were also ugly, missing expectations by a comparable account, printing at 551K, with consensus of 590K(and the previous revised this time lower from 594K to 574K). In starts, annualized single-family units dropped from 415k to 394k, with declines in Northeast and South, and increases in the Midwest and West. The actual, non-annualized number of starts was 46.8k, with 36.2k in single family units. Completions increased modestly from 532k to 554k. And the most interesting number was the number of houses under construction, which hit a fresh all time low on an annual, seasonally adjusted basis, or 418k.

Case Shiller Shows Continued Double Dip

More ugly news shrugged off by Wall Street.

from the Case Shiller report:

"With an index level of 139.27, the 20-City Composite is virtually back to its April 2009 trough value (139.26); the 10-City Composite is 1.5% above its low...

In February, the 10-City and 20-City Composites were both down 1.1% from their January 2011 levels. Nineteen of the 20 MSAs and both the 10-City and 20-City Composite fell in February versus January. Of these, 14 MSAs and both Composites posted negative monthly returns for more than six consecutive months. With the February 2011 report, 11 of the 20 MSAs and both Composites are down by more than 1% compared to their January levels."

Fannie, Freddie Weigh Down U.S. Credit Solvency

from HousingWire:

The United States' quantitative easing policy did not impact Standard & Poor's decision to place the sovereign rating on negative outlook, but its conservatorship of Fannie Mae and Freddie Mac certainly did.
One of the pressures on the credit is analysts' estimate that it could cost the U.S. government up to "3.5% of GDP to appropriately capitalize and relaunch Fannie Mae and Freddie Mac" in addition to the 1% of GDP already invested.
S&P analysts said the government may have to inject as much as $280 billion into the government-sponsored enterprises, which includes $148 billion already spent, to cover losses at the housing finance companies that were put into conservatorship in September 2008.
"By our estimates, that $280 billion could swell to $685 billion if the government capitalizes Fannie and Freddie on a commercial basis," S&P said.
S&P's $280 billion projections for Treasury GSE support is primarily based on losses from the guarantee business, writes Margaret Kerins, a GSE credit strategist at the Royal Bank of Scotland (RBS: 13.69 -2.28%) in a quick reaction note to clients Monday. The $685 billion is based on the government replacing Fannie Mae and Freddie Mac and proving the capital for the successor entities.
"We think that this outcome is highly unlikely as it implies a government-owned entity with the taxpayers bearing the cost of capitalization," she wrote. "The majority of the housing finance proposals seek to limit government support and the cost to the taxpayers."
S&P added that it does not expect the United States to default on any debt obligations.
Furthermore, other economic activities of the federal government during the downturn, such as the implementation of quantitative easing, is to the country's credit, S&P stated.
"We find that risks of deflation in the U.S. have lessened and that there are few indications that inflation expectations have become untethered," the report states. "Although it will be challenging to sequence the unwinding of these operations while raising policy interest rates once the recovery has become firmly rooted, we believe that the credibility of monetary policy will continue to be a credit strength for the U.S."

Not a Pretty Picture! Housing is Still in a Bubble -- and Going to Get Worse!

And Gary Shilling says home prices will decline another 20%!

Housing Hullabaloo

Another coming catastrophe!

from Business Insider:
Even the baseline scenario in places like Las Vegas and Miami is grim, where Case Shiller projects a 21% decline in home prices from 2010 to 2012.
But in one scenario it could be worse.
6.7 million delinquent mortgages are waiting to flood the market around the country -- and with near-zero cure rates most of them will. Another 2 million homes in foreclosure are being held off the market by banks.
Economist Keith Jurow says distressed asset investors are ignoring this threat: "If you are an investor thinking of buying one or more properties in Miami-Dade County, for example, you need to know that 24.9% of all active first liens there were seriously distressed. This means that more than 91,000 properties are almost certainly going to be dumped onto the market. Will that exert downward pressure on prices? Absolutely."
Distressed mortgages represented over ten percent of all mortgages in ten large markets, as of Q3 2010.