Stocks Fall Despite Great Housing News

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Stocks are trading lower today on a mixture of conflicting economic reports and fear that a resolution to the fiscal cliff won't be accomplished before the end of the year. At roughly halfway through the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down by 11 points, or 0.08%.

The National Association of Realtors reported today that sales of previously occupied homes last month increased to their highest level in three years. According to its report, total existing-home sales -- which consist of completed transactions involving single-family homes, townhomes, condominiums, and co-ops -- rose 5.9% to a seasonally adjusted rate of 5.04 million in November. The figure represents a 14.5% increase over the same month last year, and is now at the highest level since November 2009.

According to Lawrence Yun, NAR's chief economist: "Momentum continues to build in the housing market from growing jobs and a bursting out of household formation. With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes."

It was also reported today that the number of Americans filing for unemployment benefits rose last week, albeit slightly, suggesting a "stable but only slowly improving labor market," according to The Wall Street Journal. Data from the Labor Department showed that initial jobless claims increased by 17,000 to 361,000 for the week ended Dec.15. The figure was in line with economists' forecasts. To read the full report, click here.

In terms of individual stocks, Bank of America (NYSE: BAC  ) and General Electric (NYSE: GE  ) are the best-performing Dow components going into the lunch hour. To say that B of A has performed well this year would be an understatement, as its share price has effectively doubled since the beginning of January. It was reported earlier today that B of A's CEO, Brian Moynihan, decided against cutting compensation packages to its thundering herd of financial advisors (operating under the Merrill Lynch banner). The move comes amid the bank's strategy to concomitantly cut costs and attract top talent. To see why I think B of A is a buy, click here.

General Electric, alternatively, is higher on the back of an analyst upgrade. A research report by Bernstein Research analyst Steven Winoker predicted that the industrial conglomerate will benefit from a "very low tax rate" when it reports fourth-quarter earnings in the middle of January.

On the downside, alternatively, the two worst-performing Dow components are Merck (NYSE: MRK  ) and Caterpillar (NYSE: CAT  ) , lower by 2.4% and 1.3%, respectively, in midday trading. Merck's shares are suffering after the pharmaceutical company announced the failure of its Cordaptive cholesterol drug. According to my colleague Dan Caplinger, "The study had hoped to show that a therapy combining high doses of niacin with another drug called laropiprant would raise favorable HDL cholesterol levels while reducing levels of unhealthy LDL cholesterol. With the failure, Merck said it won't try to get approval for the drug in the U.S., and even though the FDA first rejected the drug back in 2008, it has already gained approval in Europe."

Meanwhile, Caterpillar's shares are trailing the broader market following the company's report that global machine sales rose at a disappointing pace for the three months ended Nov. 30. According to the report, sales reported by dealers rose 5% from the same time period last year. This is down from the 8% year-over-year increase for the three-month period ended Oct. 31. Many are attributing the downbeat results to the uncertainty surrounding the fiscal cliff. According to an analyst quoted by Bloomberg News, "North America has decelerated somewhat into the end of the year due to economic uncertainty and political uncertainty."

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10/21/2016 4:00 PM
BAC $16.67 Up +0.11 +0.66%
Bank of America CAPS Rating: ****
CAT $86.33 Down -0.30 -0.35%
Caterpillar CAPS Rating: ***
GE $28.98 Down -0.09 -0.31%
General Electric CAPS Rating: ****
MRK $61.20 Down -0.72 -1.16%
Merck and Co. CAPS Rating: ****