Taper Coming Despite Weak Data? - Ahead of Wall Street
27 August 2013 - 12:03AM
Zacks
Monday, August 26,
2013
(Note: Many thanks to Mark Vickery for ably holding the fort in my
absence last week.)
Hard to tell how this morning’s underwhelming Durable Goods report
plays out in the Taper debate, but there is no denying that
this reading doesn’t provide an inspiring picture of the economy.
This report by itself is likely not enough to cause the Fed to
delay a September taper, but some may start hoping that this
combined with the weak housing report on Friday may prompt a Fed
rethink.
Friday's sharp drop in New Home sales is perhaps the latest
indication that the Taper talk and associated rise in yields is
starting to have an impact after all. We will get more housing
related data this week through the Case-Shiller home price index
and the Pending Home sales numbers. But further housing data along
the lines of new-home sales numbers would be indicative of the
housing recovery stalling out. The stock market has been reflecting
this loss of momentum already, with stock prices of all major
homebuilders like D.R. Horton
(DHI), KB
Home (KBH), and
PulteGroup (PHM) off materially since the start of the uptrend
in mortgage rates in May.
Housing has been the economy’s brightest spot thus far and a
downgrade on that front will have a bearing on the overall growth
outlook. I agree with the consensus view that the current economic
picture is good enough for the Fed to make a move on the Taper
issue, though this morning’s Durable Goods and Friday’s New Home
sales data do give me second thoughts.
In corporate news, Amgen (AMGN) is purchasing cancer drug maker Onyx
Pharmaceuticals (ONXX) for $10.4 billion. The deal wasn’t unexpected
as Amgen was believed to be looking at Onyx to tap into the cancer
drug market. Onyx doesn’t have much in terms of a drug pipeline,
but its multiple myloma drug, Kyprolis, is expected to reach
billion dollar sales in the next couple of years. The drug was
approved last year and had sales of $125 million in the first half
of the year.
Sheraz Mian
Director of Research
AMGEN INC (AMGN): Free Stock Analysis Report
D R HORTON INC (DHI): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
ONYX PHARMA INC (ONXX): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis Report
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