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Stocks Sell at Discount Prices; Existing Home Sales Drop

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Market indices rallied back, seemingly rejuvenated after a three-day weekend off the worst trading week of this bear market period. The Dow closed the session north of 30K once again, +643 points on the day or +2.15%. It and the S&P 500 — +2.45% today — notched their biggest up-days since May 4th. The Nasdaq gained nearly 271 points, +2.51%, while the small-cap Russell 2000, after a dismal -4% week, gained +1.7% back today.

Obviously, it remains to be seen whether the markets can sustain this march higher, especially without a lot of data or earnings surprises to help change market participants’ minds, in the days to come. Yesterday in this column we did a quick P/E comparison among big-name Zacks Rank #3 (Hold) stocks, and their ratios currently resemble an evaporating reservoir — they’re all way down. Cue bargain-shoppers. Cue the strongest bounce in six weeks.

Today’s Existing Home Sales for May posted the smallest headline number in almost two years: 5.41 million seasonally adjusted, annualized units, exactly in-line with estimates but below the 5.60 million posted in April, -3.4% month over month. It’s the fourth straight down month, as Inventory blossomed +12.6% from April to May.

Some slack in Existing Home Sales is a good step toward prices coming down in the future, which would likely begin showing up in inflation data over time. As of now, however, housing prices remain hot hot hot: the median existing home price reached $407,600 last month, +14.8% year over year. As the National Association of Realtors states, however, “Further sales declines should be expected in upcoming months…”

At the start of 2022, Existing Home Sales were cruising along at around 6.5 million per month, so we’re already a million-plus off that pace. Friday brings us the sister-report New Home Sales for May, expected to come in light of the previous month’s disappointing 591K headline number. It would seem some demand is indeed eroding in these Housing metrics.

Aside from interviews and presentations from Fed Presidents Harker and Evans, and the first part of Fed Chair Powell’s testimony on Capitol Hill, tomorrow is expected to be another light day for data. We hope the positive sentiment in today’s market activity doesn’t fade like the summer solstice.

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