Registered Investment Adviser Caleb Lawrence
Despite generally positive economic data the major averages enter the final hour mixed seemingly weighed down by high and rising geo-political tensions.
After a string of disappointing reports related to real estate and construction, Existing Home Sales beat expectations in May with a 1.1% gain to 5.62 million units annualized on strength in all regions except the Midwest which declined. Month’s supply increased to a still very low 4.2 while the median priced advanced $7,800 to $252,800, a 4th consecutive gain putting prices up 5.8% from a year ago.
The Mortgage Bankers Association or MBA reports that mortgage activity increased .6% last week as refis advanced 2.1% while purchase apps slipped 1%. The 30-year contract rate for a conforming loan was unchanged at 4.13%.
One of the more recent examples of financial engineering with respect to the equites markets was the use of debt and most available free cash to buy up company shares and maintain the illusion of profitability on a per share basis while also holding down valuations. Bingeing on debt only goes so far hence the drop off in not only share buy backs but also Mergers and Acquisitions or M&A activity as noted by CitiGroup who pointed out that M&A’s fell by a 1/3 since the 2016 peak while the value of deals year to date is tracking a 4-year low.