Semi-soft? Pending home sales, jobless claims, GDP

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Corrects 5th paragraph of 1045 EDT/1445 GMT post to say multi-decade highs, not record

All three major U.S. stock indexes up

Commun. services lead S&P sector gains; utilities down the most

Euro STOXX 600 index up ~0.2%

Dollar, gold, crude dip; bitcoin up

U.S. 10-Year Treasury yield edges up to ~4.65%

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A data triple play on Thursday appeared to question whether the Fed will be able to pull off that fancy "soft landing" trick everyone's been going on about.

Pending sales of previously owned U.S. homes USNAR=ECI tumbled 7.1% last month, according to the National Association of Realtors (NAR), much steeper than the 0.8% dip analysts expected.

The index hit 71.8, which is the lowest it has been since the one-month COVID shock of April 2020 (the index rebounded to 100.9 in May 2020 - and has been below 100 for the last 17 months).

The pending sales index, which tracks contracts signed, is considered among the more forward-looking among housing market indicators as those signed contracts typically turn into actual sales a month or two down the road.

Potential homebuyers are stymied by a dearth of inventories which is mainly attributable to mortgage rates scaling multi-decade highs,making the timing unattractive for lower-rate mortgage holders to put their homes on the market.

The average 30-year fixed contract rate USMG=ECI reached its highest level in 23 years last week, according to the Mortgage Bankers Association. Add to that mix the fact that home prices - driven by lack of supply - are once again on the upswing, and the prospect of making monthly payments drifts outside the realm of affordability for many potential buyers.

"Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers," writes Lawrence Yun, chief economist at NAR. "It's clear that increased housing inventory and better interest rates are essential to revive the housing market."

The number of U.S. workers to join the queue for unemployment benefits USJOB=ECI hardly budged last week, inching 1% higher to 204,000 and landing 5.1% to the south of consensus.

Weekly noise aside, the broader trend is heading downward, with the four-week moving average of initial claims dipping by 2.9%, suggesting that whatever labor market softness resulting from a year-and-a-half of Fed policy tightening has yet to manifest itself in pink slips.

"We expect some increase in layoffs later in the year as the economy slows but look for job losses to be modest," writes Nancy Vanden Houten, lead economist at Oxford Economics.

Reiterating her belief that the Fed will hold key interest rates where they are "before embarking on a very gradual pace of rate cuts in mid-2024," Houten adds that "the Fed needs to see other signs that the labor market is continuing to come into better balance if it is to refrain from further rate hikes."

Ongoing claims, reported on a one-week lag, crept 0.7% higher to 1.67 million, lingering just below the pre-pandemic level.

And now, for some news from the Jurassic period. The Commerce Department took its third and final stab at second-quarter GDP USGDPF=ECI, leaving it unchanged, as expected, at a fairly robust quarterly annualized gain of 2.1%.

But beneath the placid surface, the GDP deflator - which tracks changes in U.S.-produced goods and services - was revised 30 basis points lower to 1.7%.

More worryingly, growth of consumer spending - which accounts for about 70% of the economy - was slashed to 0.8% from 1.7%.

"The consumer is much weaker than initially thought as economic momentum slows," says Jeffrey Roach, chief economist at LPL Financial. "The key takeaway is consumers are nearing the end of their spending splurge. Investors should expect further slowing in the final quarter of 2023 and businesses would do well to prepare for a period when the consumer will retrench and become a bit more cautious on spending.

(Stephen Culp)



Rising crude prices may be a growing risk for investors concerned about sticky inflation forcing central banks to keep rates high for longer. But, for energy firms, that just means fatter margins out of their traditional oil operations.

And energy stock bulls seem to be striking back.

In Europe, just as the broader STOXX .STOXX is flirting with a sixth straight day of losses, TotalEnergies TTEF.PA has made a new record high, one day after the biggest U.S. major Exxon Mobil XOM.N also climbed to a fresh lifetime peak.

After four consecutive quarters of falling crude prices, the tide is turning. Brent LCOc1 prices have risen around 29% so far in the third quarter, and profit expectations are improving, suggesting the upcoming reporting season might bring along some positive news.

Take the STOXX Oil & Gas index .SXEP. LSEG Datastream data shows earnings revisions - a metric investors watch to gauge market momentum - are now positive for the index after months in the red, and analysts now see earnings growth of around 4% in 2024, versus a big drop seen in January.

The picture is pretty much the same for the S&P 500 energy sector .SPNY, which includes Exxon along with other 22 energy companies such as Chevron CVX.N and Conocophillips COP.N. Net earnings revisions for the index are also positive while 2024 profit growth is seen at 2.1%.

Yet not all are enthused, as seen here: GRAPHIC-High oil prices don't make Europe energy stocks attractive to all

(Danilo Masoni)



Higher borrowing costs have ravaged the U.S. utilities sector this year, but the growth of artificial intelligence (AI) could act as the "Hammer of Thor" by providing the much needed 'thunder' for the industry in the long run.

Citigroup says power market participants forecast AI-driven load growth to be about 30% per year (or about 40 basis points) in the U.S.

"These forecasts, albeit bullish, have not been priced into current physical power forward price curves," Citi adds.

The load growth is expected to be centered in Northern Virginia, followed by Texas, California, and the Southeast as that is where existing data centers are located, brokerage says.

Data centers utilize huge amounts of power for their functions such as computing and storing data and the revolution of AI has amplified the need for data centers.

The utilities sector .SPLRCU is the worst performer among S&P 500 .SPX groups, having fallen nearly 15% so far this year.

Within Citi's coverage universe, AES Corp AES.N and American Electric Power AEP.O, PG&E PCG.N, CenterPoint Energy CNP.N and Sempra SRE.N may benefit from load growth brought by additional demand, as they own electric utilities in those regions.

The brokerage says in order to facilitate this growth, PJM Interconnection, the biggest U.S. power grid operator, and the Electric Reliability Council of Texas (ERCOT), which operates the grid for more than 26 million customers, are making plans to handle the additional load.

"In the short term, the impacts are minimal but could be more pronounced over the long run for the industry," Citi adds.

(Siddarth S)



The S&P 500 index .SPX survived a test of the support line from its October 2022 low on Wednesday:

Indeed, the benchmark index hit a low of 4,238.63, which put it essentially right on the line, which was around 4,235. The SPX then rallied and eked out a tiny gain on the day.

At the low, the S&P 500 was down around 8% from its late-July intraday high.

Meanwhile, with the small gain, the daily relative strength index (RSI) ticked up slightly. On Tuesday, it had fallen to its most oversold level since September 27, 2022.

Now in the wake of the latest batch of economic data, e-mini-S&P 500 futures EScv1 are suggesting a roughly flat open on Thursday.

In any event, traders will remain focused on whether the support line, which ascends to around 4,237 on Thursday, can continue to contain weakness.

The SPX faces initial hurdles in the 4,302-4,312 area followed by the 4,325-4,335 area. There is a weekly Gann Line which is now acting as resistance that resides around 4,371 and the 100-day moving average (DMA) will be around 4,385 on Thursday.

In the event the support line gives way, the next levels are at the 50% retracement of the March-July rally at 4,207.97 and the rising 200-DMA which will ascend to around 4,197 on Thursday.

There is a weekly Gann line which is now acting as support at 4,175 and 50% retracement of the S&P 500's 2022 decline is at 4,155.

(Terence Gabriel)



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


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