Dollar and Wall Street intact despite ugly housing data

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  • Both housing starts and building permits came in well below expectations in February. 
  • A collapse was mainly driven by a plunge in multi-family houses, that adds to concerns about the whole housing market amid rising mortgage rates. 
  •  US dollar downplays ugly readings, the SP500 futures (US500 on xStation5) keep rising and bouncing off an important support line.

 
The disappointing housing data did not dent either the US dollar or US equities even as they could have added to concerns about a condition of the country’s housing market amid an environment of rising borrowing costs. In less than 30 minutes before the opening on Wall Street futures are pointing to a good start taking cue from European indices being traded a bit higher on the day.

 

  • A continued downtrend seen in building permits does not bode well for existing ad well as new home sales going forward.


Housing starts declined as much as 7% in February compared to the first month in 2017 while building permits shrank 5.7% at the same period of time, both readings fell short of expectations being set at -2.7% and -4.1% respectively. The prime reason for a plunge in housing starts was chiefly driven by multi-family houses falling as much as 26.1% on a monthly basis. The same case was seen in permits where a multi-family category tumbled 18.7%. On the other hand, starts and permits for single family houses turned out to be much more resilient cushioning the overall result to some extent. While one swallow doesn’t make a spring, and of course the other way around too, the housing data appears to deserve more scrutiny going forward given upward pressure on mortgage rates.

 

  • "So far so good" according to US homebuilders whose confidence hovers close multi-year highs.

While we were offered some disillusion in February US homebuilders are far away from any panic despite the latest increase in mortgage rates. Finally, one needs to be aware that the tight labour market leads to increased demand on houses and therefore a much higher pick-up in borrowing costs seems to be needed to make buyers afraid of their credit worthiness in the future.

 

  • The US500 is testing a crucial short-term support in form of 200-moving average seen in an hourly time frame. If the price manages to stay above it one may count on a rise toward 2805 points.