Market Commentary

Until the last hour of trading
June 23, 2010

Until the last hour of trading, there was little to write about yesterday’s market activity.  The Dow dropped about 150 points in the final hour as I believed algorithmic again dominated trading as prices slipped below a key technical level.  Some would point to the Administration’s plans to challenge the lifting of deep water drilling ban or disappointing existing home sales as the catalyst, but this news was known since 10:00 A.M.

Regarding May’s existing home sales, sales surprisingly fell by 2.2%.  This decline contradicted the strength in the pending home sales index thus suggesting many contracts signed just prior to the tax credit deadline in April were delayed in closing for a myriad of reasons.  I suspect June’s existing home sales will support this claim but I will write existing home sales will slide during the summer months.  The question is how much?

Last week I drew an analogy between last summer’s cash for clunkers program and the home buyers’ tax credit.  Many thought auto sales would plunge and then remain around a 9.2-9.5 million mark.  Yes auto sales did decline as expected but then rebounded, averaging around 11.5 million units since December.

I think home sales will follow a similar path.  I am not suggesting a return back to 2006, a period akin to 17 million vehicles being sold, but rather one of moderate sales supporting a modest rebound off of depressed levels.

Around 2:15 today the FOMC will make its post meeting statement.  How will the statement be tweaked, a topic discussed yesterday?  Will the Committee categorize the recent softness as “typical” in every recovery for as nothing moves linear?  To state the obvious all will scrutinize every word in attempt to gain insight into the Committee’s thinking.

New home sales are also released today.  Will sales follow a similar path as its existing sales brethren?  The data is released at 10:00 and 410K units are expected to be sold.

Last night the foreign markets were down. London was down 0.51%, Paris down 0.66% and Frankfurt down 0.27%.  Japan was down 1.87% and Hang Sang up 0.18%.

The Dow should open moderately higher following several positive corporate statements.  The 10-year is off 3/32 to yield 3.18%.