Stocks slid on Thursday in what was a busy day for economic data as a reading on the US labor market was better than expected while manufacturing data disappointed.
First, the scoreboard:
Dow: 17,982.5, -113.7, (-0.6%) S&P 500: 2,091.5, -10.9, (-0.5%) Nasdaq: 4,945.9, -2.2, (-0.05%) WTI crude oil: $43.50 -1.5%
Deutsche Bank’s Joe LaVorgna isn’t concerned about a housing affordability crisis.
“To be sure, the housing market was expected to be weak in the aftermath of the recession, as households repaired their severely-impaired balance sheets,” wrote LaVorgna in a recent note to clients.
“However, household deleveraging is now complete, mortgage rates are low and banks have been loosening lending standards for residential mortgages. Therefore, an optimistic perspective is that the recent data are an aberration and housing will contribute meaningfully to growth in the remainder of this cycle.”
And so contra arguments made by yours truly that the housing market is facing a problem of too many buyers wanting lower-end homes in an under-supplied market, LaVorgna sees the market as trending towards a better place.
The problem with this argument, in my view, is that looking purely at the potential for more favorable financing conditions still ignores that the homes which are actually affordable simply do not exist. So we need more cheap houses or more wages, both of which will be painful for corporate America.
And home prices continue to rise, with Thursday morning seeing the latest home price index from the Federal Housing Finance Agency show prices were up 5.6% compared to the prior year in February.
The economy is not that exciting right now. Things are fine, not great but not terrible.
Thursday morning saw the latest reading on initial jobless claims fall to 247,000, the lowest number of initial filings for unemployment insurance in any single week since November 1973.
On the other side, the Philadelphia Fed’s April reading on manufacturing activity indicated a contraction in activity in the sector after a big rebound in March.
Take the good with the bad and you muddle through.
The renewable energy company, which has been a favorite of hedge fund investors, had seen its stock crash about 90% in the last nine months after its strategy of acquiring companies to grow its business fell apart. In the process the company racked up about $11 billion in debt.
Shares of SunEdison had sort of made clear for some time that a bankruptcy reorganization was going to be necessary. And so here we are.
Also in the bankruptcy space, Bloomberg reports that Aeropostale is close to filing for bankruptcy.
The NYSE, following this news, suspended trading in the stock.