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Q1 Deficit at Multi-Year Lows; Pre-Markets Green

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Wednesday, June 23, 2021

Market futures continue to inch forward into the green this week, after filling in potholes Monday left from last Friday’s trading. The Dow is +75 points at this hour, the S&P 500 +5 and the Nasdaq — fresh off all-time closing highs Tuesday afternoon — is +10 points a half hour before the opening bell.

We are a bit light on early morning data today, but we do see results for the U.S. Q1 Account Deficit, which continues to carve out new multi-year lows: -$195.7 billion — down notably from the upwardly revised -$175.1 billion from Q4 2020, but not as bad as the -$205 billion projected ahead of the announcement. Going back a little further, Q3’s account deficit has dropped to -$180.9 billion.

These are levels not seen since the quarters directly prior to the Great Recession in the late Aughts, and, although no one is pegging these deficits for cratering the economy back then — falsified AAA mortgage derivatives were — one thing the build-back in 2009 was pay down the account deficit, for a time, at least, to 11-figures below zero rather than 12. The all-time low was -$218.4 billion, back in Q2 of 2007.

After regular trading begins this morning, we expect new Markit PMI results in both Manufacturing and Services for the month of June. Both are expected to moderate slightly from May levels, though these reads are expected to remain near all-time highs.

Finally, New Home Sales from May are also expected to come down a tad from April levels: 859K estimated compared to 863K. These prints are still lower than we’ve seen over the past year on average, with a 9-handle in more than half the months reported over that time. This illustrates that high demand for new housing has been with us most of the past year, but only this spring’s commodity shortages and subsequent price spikes for things like lumber have cooled this market down.

We saw this in Existing Home Sales yesterday: a fourth-straight lower month showed higher prices squeezing out first-time buyers, and those on the low end of house price-points. Because while the median price for an existing home last month was above $350K for the first time, existing homes priced between $750K-1 million — still far, far from the top of the range — increased 178%. It should bev interesting to see how new and existing home prices compare for last month.

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