Apr 19 • 7M

New Residential Construction, Earnings: Daily Contrarian, April 19

Stock futures are down a bit after a quiet Monday. The quiet is unlikely to persist…

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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.
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Good morning contrarians!

Stock futures are down a bit a day after a relatively quiet Monday. The Russell 2000 which tracks small caps was the only major index seeing any kind of significant movement, dropping by about 1%. Other indexes were effectively flat.

As of 0630, only tech stocks are doing anything worth mentioning, down about 0.2%. Individual stocks seeing movement include Johnson & Johnson (JNJ), which is down almost 4% ahead of earnings. Ralph Lauren (RL) is among the winners this morning, up 3%.

Bonds aren’t doing anything a day after the 10-year yield rose to multi-year highs. The 10-year is flat this morning at 2.89% whilst the 2-year is also flat at 2.47%.

Commodities are down, with WTI crude oil dropping 1.5% to $106/barrel. Natural gas in the U.S. is down 3%. Industrial metals are mixed with palladium down almost 3% but aluminium and nickel up 1%.

Cryptos are bouncing again, with bitcoin up 5% to trade around $40,700.

Economic Data Releases

The two leading data indicators for housing in the U.S. publish today as part of the Census Bureau’s New Residential Construction report: Building permits and housing starts are out at 0830. Economists expect building permits — the most leading of leading indicators — to come in at 1.83 million, a bit below last month’s 1.87 million. Housing starts are expected at 1.75 million versus 1.8 million last month. As you can see from the below chart, these metrics have been quite healthy and economists don’t expect much in the way of a slowdown.

There has been a lot of noise about the cooling housing market due to higher mortgage rates. So far that is mostly anecdotal, but today’s data will potentially bear that out. If it does, investors may get a bit spooked. This makes sense seeing how housing is the main driver of economic growth in the U.S. and therefore the world.

Earnings

It’s a busy morning with Johnson & Johnson just missing on revenues while beating on earnings-per-share. Importantly, the company is maintaining its guidance for the year. Edit: However JNJ is lowering its adjusted EPS outlook. Also missed the fact that JNJ is hiking its dividend.

Hasbro (HAS) just reported a miss on EPS whilst revenues were in-line with forecasts. But the company is resuming its stock buyback program, which may temper things. Halliburton (HAL) and Lockheed Martin (LMT) are also due to report before the open at 0930. After the close at 1600, we’ll hear from IBM (IBM) and Netflix (NFLX).

These are some pretty big companies. Anything they can say about consumer spending and inflationary pressures will be valued by the market.

The Bottom Line

The housing report should be interesting given all the noise we’ve seen there. This is a bit of a lagging indicator seeing how the data is for March, but if new building permits and housing starts are holding up it means the real estate market could still have life. One would think developers will be hesitant not to overbuild after the 2008 fiasco. But maybe that’s giving developers too much credit.

Other than that, earnings should drive things.