The dollar finally reached a point on the calendar where viable fundamental triggers could supply the much-needed market volatility traders need. However, when the housing numbers hit the wires with a larger than expected decline, the greenback shrugged it off leaving tomorrows durable orders and new home purchases as the last pieces of actionable data for the week.
Looking to the charts, price action was drifting in most of the liquid majors. For EURUSD, a 50-point rally on German data to 1.3005 slowly turned to a consolidation pattern into the New York session. Loosening the correlation strings, USDCHF produced more directionality in a gradual, 80-point decline from yesterdays rejection of 1.25. The pound followed the euros lead with an 85-point rally in European hours only to stabilize around 1.97 as time worn on. Finally, the dollar found some buoyancy against the Japanese yen following yesterdays drop. The USDJPY bounced off of 120.20 with a spike low in the overnight and proceeded to climb 90 points.
Market participants were finally able to shift their focus back to macro economics to guide their fundamental valuations. The most highly anticipated release for the day was the National Association of Realtors existing home sales statistics. Accounting for an estimated 85 percent of the entire housing market, strength in existing home purchases is often considered the primary indicator for the sector. According to the industry groups statistics, sales dropped 0.8 percent last month. While the market was prepared for the first correction in three months, the actual drop was greater than economists had accounted for. In fact, at 6.22 million units, the annual pace is only slightly higher than the multi-year low printed only a few months ago. Now economists and traders are left to determine whether this is a sign that the housing market has resumed its record breaking drop, or if this number still holds to the bottoming out foretold by NAR and some a few Fed board members. Looking to the official statistics, the picture is still unclear. Decembers numbers closed on the biggest drop sales in 17 years. On the other hand, inventories and prices may forecast better performance for the months ahead. Inventories, which bloated to a record last quarter, slipped from 3.81 million units to 3.51 million. Elsewhere, housing prices leveled out for the month, suggesting buyers and sellers are beginning to find common ground in the current environment.
While the housing indicator retained the greatest level of event risk for the day, there were a few other notable numbers that flew under the radar. First time jobless claims for the week ending January 20th printed a worse than expected jump to 325,000 filings. This was in sharp contrast to the previous periods 11-month low 289,000 marked in the previous period. However, the trend underlying these numbers is still rather bullish. The less volatile four-week moving average rose only slightly modestly to 309,250 near the bottom of the mean range for the moving average going back though 2006. Moreover, last months Help Wanted Index jumped to a 33 print, lifting the read further away from the recent low printed in September. Together these labor indicators call for a strong payrolls report next week.
Equities faltered on the open Thursday morning and only intensified their drop as the day progressed. By 16:45 GMT, the tech-heavy NASDAQ gave back some of its sizable gains from yesterday on a 0.35 drop to 2,457.59. Not far behind, the S&P 500 fell 0.34 to 1,435.29 while the Dow lost 0.28 to 12,586.84. Once again, earnings reports were guiding broad indices through the session. Struggling auto-maker stunned the market after reporting an extraordinary $5.8 billion loss related to restructuring costs. Despite the record-breaking capital drain, shares were able to hold steady with only a 0.1 percent slip to $8.19 by the afternoon hours. Elsewhere, preemptive selling pushed Microsoft shares $0.45, or 1.5 percent, lower to $30.64. The software giant is scheduled to report its quarterly earnings numbers after the close.
Treasuries were put back into motion Thursday morning as poor data from Europe led international investors to US assets. The ten-year note was trading off 10/32nds at 98-08 with yields up 4 basis points at 4.849 by 16:45 GMT. T-Bonds dropped 17/32nds from face to 93-04 while yields also picked up 4 basis points to rise to 4.947.
