After three days of gains, the US stock market gave them all back yesterday. From Bloomberg:
U.S. stocks fell the most in a month as a Kansas bank's failure and speculation American International Group Inc. will post a loss heightened concern that credit writedowns will keep rattling the financial system...
The S&P 500 dropped 25.36, or 2 percent, to 1,266.84, ending a three-day advance. The Dow Jones Industrial Average slid 241.81, or 2.1 percent, to 11,386.25, with all 30 of its companies lower. The Nasdaq Composite Index decreased 49.12 to 2,365.59. About 865 million shares changed hands on the New York Stock Exchange, the slowest trading day of the year. Volume last week was 35 percent less than the year-to-date average.
A reported rise in US home resales didn't help the stock market much. From another Bloomberg report:
Sales of previously owned homes in the U.S. rose 3.1 percent in July, a gain that masked further housing weakness as inventories of unsold properties increased.
Resales advanced more than forecast to an annual rate of 5 million, with at least one-third of the purchases coming from foreclosed properties, the National Association of Realtors said today in Washington. At the same time, the median price dropped 7.1 percent from July 2007, and the number of homes for sale jumped to a record.
A true recovery in the US housing market may still be some way off. Again from Bloomberg:
A recovery in the U.S. housing market from the worst slump since the Depression is unlikely until "well into 2009," Housing and Urban Development Secretary Steve Preston said today.
"I think we're right in the middle of it, and I think we have a ways to go before we start seeing a turnaround," Preston said today in an interview at the agency's Washington headquarters. "We'll be well into 2009 before we see some real energy in this market."
That could mean that housing remains a drag on the US economy, already weak as it is according to the Chicago Fed National Activity Index.
The Chicago Fed National Activity Index was –0.67 in July, down from –0.59 in June. Three of the four broad categories of indicators—employment; consumption and housing; and sales, orders, and inventories—made negative contributions to the index in July.
The three-month moving average, CFNAI-MA3, increased to –0.80 in July from –0.94 in the previous month. This negative value suggests that growth in national economic activity was below its historical trend. In addition, July marked the eighth consecutive month that the CFNAI-MA3 was near or below the –0.70 threshold, which following a period of economic expansion indicates an increasing likelihood that a recession has begun. With regard to inflation, July’s three-month moving average indicates low inflationary pressure from economic activity over the coming year.