E-mini stock index traders focus on earnings

Good day! Tuesday was a day driven by news - mainly the latest earnings reports. This pushed the indices to new highs on the year. After retesting Monday's lows heading into midnight, the index futures turned higher in the early morning hours. This rally continued into 5:15 a.m. ET, but the move stalled until the U.S.'s morning data started to come in.

Among the strongest earning's gainers were Delta (DAL), Cummins (CMI), 3M (MMM), and IBM (+IBM). All of them posted better-than-expected results. Not all news, however, was good news. Coca-Cola (KO) missed both profit and revenue expectations. Its exposure in Japan was viewed as the main cause. Nevertheless, although lower than expected, its first-quarter profits still grew by 18%.

Dow Jones Industrial Average (Figure 1)

February was also another dismal month for the housing market, but this particular announcement comes as no surprise. According to the S&P/Case-Shiller index of home prices, home values were down 3.3% in February based on the average for 20 major metropolitan areas. Only Washington, D.C. has managed to see a an increase in home values over the past year, while Phoenix and Minneapolis were the hardest hit with losses topping 8%.

Overall home values are down 32% compared to the highs set in early 2006 with Phoenix being the hardest hit, down 56% off highs. After peaking that spring, prices fell for 36 months before bouncing slightly for a year. Since last summer, however, the decline has resumed and home prices are aiming for a retest of the low hit almost exactly two years ago. Distressed sales currently account for more than 30% of all home purchases.

The government made a lot of concessions to stem the decline several years ago, but with few incentives remaining to buy and mortgages more difficult than ever to obtain, real estate has a long road ahead of it before we can ever hope to see a decent recovery take hold. Despite widespread predictions of a bottom by next year, any real recovery is going to lag jobs growth, making it rather unlikely that we see much improvement in the year to come.

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