Stocks post another red day, but at a much higher level than expected

Monday, September 29, 2014 -

Stocks closed modestly negative after gapping strongly down at the open as end-of-month window dressing from large players managed to prevent another collapse in prices with only one session left for September and Q3 2014 trading.

Stocks started the week deep in negative territory at the open and then gradually moved higher throughout the day until by the close most major indexes were only modestly underwater as opposed to the initial “drowning” – buyers ruled the trading day after the strong negative open.

All the major US indexes posted losses today though well off the extreme lows of the session. The Dow dipped 42 points (-0.3%) to 17,071, the Nasdaq edged down 6 points (-0.1%) to 4,506, and the S&P 500 slipped 5 point (-0.3%) to 1,978. The NYSE finished at -0.46% and the small cap Russell 2000 at -0.13%.

The major European indexes also moved to the downside –the U.K.’s FTSE 100 Index closed just below the unchanged line, while the German DAX Index and the French CAC 40 Index fell by 0.7 percent and 0.8 percent, respectively.

The initial sell-off on Wall Street at today’s open was largely attributed to growing protests by pro-democracy activists in Hong Kong. Hong Kong has long been the financial capital of Asia and after falling back under Chinese control, people in Hong Kong want some form of independence from mainland China to return, setting up a potential political crisis in one of the largest financial capitals in the world.

Chinese leaders are being careful to not turn this into anther Tiananmen Square but their patience could be wearing thin as the number of protestors continues to escalate.

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Another weak sign for housing

It keeps on giving – up – housing, that is. U.S. pending home sales pulled back in August from an eleven-month high. I suspect the optimism of homebuilders is coming to an end that we are likely to see discount prices for new homes continue, pressuring existing home sales numbers, much like last month.

The National Association of Realtors said its pending home sales index fell 1.0 percent in August after jumping 3.2 in July. Economists had been expecting pending home sales to drop by about 0.5 percent. These economists are not paying attention to all of the housing data.

While the index pulled back off the eleven-month high set in the previous month, NAR noted that it still remained above 100, considered an average level of contract activity.

Lawrence Yun, NAR chief economist, said, “Fewer distressed homes at bargain prices and the acknowledgment we’re entering a rising interest rate environment likely caused hesitation among investors last month.”

With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home,” he added.

First-time buyers have the lowest income levels and the smallest down payments, making it much more difficult for them to qualify for mortgages in a non-QE rising rate environment. Many are bracing for a future of . . .

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