Why Stocks Are Lower After Christmas

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Stocks are down marginally in midday trading following a mixture of economic news about house prices and holiday retail sales. At roughly halfway through the session, the Dow Jones Industrial Average (DJINDICES: ^DJI  )  is lower by 37 points, or 0.28%.

Data released this morning showed that home prices rose in October, further fueling the still-nascent housing recovery. According to the S&P/Case-Shiller 20-city housing price index, prices for single-family homes increased by 0.7% in October from September, on a seasonally adjusted basis. On a year-over-year basis, prices rose by 4.3%, beating expectations of 4%.

"Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength," said David Blitzer, chairman of the index committee at Standard & Poor's.

Financial stocks are mixed on the heels of this news, with Bank of America (NYSE: BAC  ) up by 1.2% and JPMorgan Chase (NYSE: JPM  ) down by 0.2%. Housing values are an important part of a bank's operations, and mortgages and related services generally constitute the lion's share of a lender's income-producing assets.

Meanwhile, data from MasterCard's SpendingPulse unit showed that holiday sales for the eight weeks ending Christmas Eve increased a mere 0.7% on a year-over-year basis. This was the slowest pace of growth since 2008 following the collapse of Lehman Brothers. Alternatively, sales from online retailers increased by 8.45% compared to 2011. Following the news, the Dow's retail components are both lower, with Wal-Mart (NYSE: WMT  ) and Home Depot (NYSE: HD  ) trading down by 0.96% and 0.68%, respectively.

Going forward, all eyes will be on whether politicians in Washington can broker a compromise over the so-called fiscal cliff, a series of tax increases and spending cuts set to take effect at the beginning of next year in the absence of Congressional action. Negotiations between the parties broke down at the end of last week, with Republicans mounting a last-minute, unsuccessful attempt to enact an alternative plan. President Obama will return to Washington tomorrow to try to force through a compromise.

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10/21/2016 11:15 AM
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