Coffee With Greta: Homebuilding Plunges in July
DJIA Futures: -45 (-0.1%)
SPX Futures: -8 (-0.2%)
NASDAQ Futures: -30 (-0.2%)
Good morning friends!
Futures are slipping as new data shows the housing market slowing further and traders digest key retail earnings.
Let’s get right to it!
Housing Starts, Building Permits Drop in July
New home construction fell more than expected in July as higher mortgage rates put pressure on builders already struggling with high material costs.
The Census Bureau reported housing starts tumbled 9.6% last month to a seasonally adjusted annual rate of 1.45 million units.
That’s the lowest rate of building since September 2020 and lower than expectations for an SAAR of 1.52 million units.
Single-family starts plunged 10.1% while multi-family starts dropped 10%
The slowdown will continue as building permits also fell in July.
The number of new permits issued fell 1.3% to a seasonally adjusted annual rate of 1.67 million units.
That was better than economists’ expectations for permits to fall to an SAAR of 1.63 million units.
The drop in permits was focused in single-family homes.
Single-family permits fell 4.3% monthly while multi-family permits rose 2.5%.
Cancelled Home-Purchase Agreements Surge
A record percentage of home-purchase agreements were cancelled in July as the housing market slows rapidly.
Redfin reported 63,000 contracts were cancelled last month.
That represented 16.1% of homes that went under contract during July, the highest percentage on record excluding March and April of 2020.
Redfin said, “The housing market is slowing as higher mortgage rates sideline many prospective homebuyers. With competition declining, the house hunters who are still in the market are enjoying newfound bargaining power–a stark contrast from last year, when they often had to pull out every stop in order to win.”
Walmart Tops Q2 Expectations
Walmart (WMT) shares are up 4.2% ahead of the open after beating Q2 expectations on the top and bottom line.
The retailer reported adjusted earnings of $1.77 per share on $152.86 billion in revenue.
That was better than analysts’ expectations for adjusted EPS of $1.62 on $150.81 billion in revenue.
Same-store sales in the U.S. grew 6.5% year over year, better than estimates of 5.9% growth.
Online sales rose 12% compared to a year ago and 18%.
Walmart’s inventory levels in the U.S. surged 25.6% year over year as the cost of goods jumped.
The company reiterated its profit warning from last month.
Walmart maintained its forecast for 3% same-store sales growth in the U.S. for the rest of this year and anticipates adjusted EPS will decline between 9% and 11% for the full year.
Home Depot Slips Despite Q2 Earnings Beat
Home Depot (HD) shares are slipping 1% in premarket trade despite beating Q2 expectations on the top and bottom line.
The home improvement retailer reported adjusted earnings of $5.05 per share on $43.79 billion in revenue.
That was better than analysts’ expectations for adjusted EPS of $4.94 on $43.36 billion in revenue.
Same-store sales rose 5.8% year over year vs expectations for 4.9% growth.
Home Depot reiterated its guidance for full-year sales to grow about 3% compared to a year ago.
The CEO and President said, “Our team has done a fantastic job serving our customers, while continuing to navigate a challenging and dynamic environment.”
Oil Prices Turn Higher
Oil prices have reversed earlier losses and turned higher in morning trade.
West Texas Intermediate crude futures are up 0.6% to $90 bbl while Brent crude futures are up 0.3% to over $95 bbl.
The market is continuing to monitor talks to revive the Iran nuclear deal.
If an agreement is reached, that deal is expected to allow Iran to boost its oil production.
The American Petroleum Institute will report weekly crude and gasoline inventory levels later today.
In Case You Missed It
- The NAHB’s sentiment index tumbled into negative territory on Monday. The survey dropped 6 points in August to 49, with any reading below 50 considered negative. That was the 8th straight monthly decline and lower than economists’ expectations for 54. NAHB’s Chief Economist said the U.S. has now fallen into a “housing recession” due to tighter monetary policy and persistently high construction costs.
- Walt Disney (DIS) shares rose 2.2% on Monday after activist investor Dan Loeb bought a new stake in the company. Loeb disclosed that “significant stake” in a letter to Disney’s CEO on Monday. In that letter, he asked the company to consider several initiatives including a spin-off of ESPN and fully acquiring Hulu to integrate it into the Disney+ platform.