The U.S. equity markets opened in the red and remained there in afternoon trading. Relatively weak pending home-sales data and ongoing concerns about the stability of the euro zone weighed heavily on investment decisions, and the S&P 500 retreated to about 5 points shy of an all-time high by noontime.
At 12:30 p.m.: DJIA: -0.24%, S&P 500: -0.26%, NASDAQ: -0.15%.
Here are three stories helping shape markets on Wednesday afternoon:
1) The Pending Home Sales Index, a forward-looking indicator based on contract signings, dipped 0.4 percent to 104.8 in February, compared to a downwardly revised 105.2 in January, according to the National Association of Realtors. Analysts were expecting a decline of about 0.3 percent.
Lawrance Yun, chief economist at the NAR, commented: “Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels. Most local home builders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.” (Read more.)
2) “The Chinese economy has been growing at a rapid pace for over thirty years,” begins a paper authored by Jane Haltmaier, a senior adviser to the Federal Reserve, that was published online this week. “From 1978 to 2011 real GDP growth averaged about 10 percent per year, resulting in a more than 20-fold increase in the level of output.”
The paper asks the question of whether or not this rate of growth will be sustainable over the next two decades. The short answer to this billion-dollar question is: no… (Read more.)
3) Consensus among observers seems to be that the the single most ill-conceived aspect of the initial bailout package for Cyprus was the attempt to charge a 6.75 percent levy against small deposits. The reason is that the charge undermines the feeling of safety that is necessary to prevent a bank run. The initial proposal, sprung over the weekend when banks were closed and followed by an extended bank holiday where cash withdrawals were severely limited, violated this principle to such a degree that economists around the world have expressed concern over the possibility of bank runs across the euro zone… (Read more.)