The Dow Jones Industrial Average (DJINDICES:^DJI) is on track to record its third straight day of gains, as long as it maintains its momentum through the remainder of trading. The boost comes from some new economic data and new comments from prominent Fed members. Some of the index's biggest winners are financial stocks, which have taken the brunt of the bad news ever since Fed Chairman Ben Bernanke spoke last week.
Housing to the rescue
Pending home sales -- a measure of contracts signed within the past month -- rose 6.7% in May as new buyers try to lock in low interest rates before they start rising. The level of sales outpaced all historical data since December 2006, when the pre-recession housing boom was still in full swing. With banks looking to grab more of the new mortgage business, Dow components Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM) are reaping the rewards this morning. Both banks are up in trading, with 1.04% and 1.73% gains, respectively. Since B of A has found itself in trouble again with mortgage customers, it's likely that investors are finding it hard to visualize the bank reaching its goal of a higher market share of new mortgage loans. JPMorgan, along with Wells Fargo (NYSE:WFC), commanded an impressive 39% of the new mortgage business in 2012, and is likely to capture a substantial portion of the recent rush of new buyer activity.
Though there's little way of knowing how long housing demand will stay at current levels, as both prices and interest rates rise in the future, the current housing bounce is certainly giving investors more optimism for a fuller recovery than other economic information is providing.
That optimism may have kept the market afloat this morning as new employment data showed a decline in new claims. Though the drop was not dramatic (only 9,000 fewer new applicants), the market has responded negatively to this kind of news as it looks for signs that the Fed's timeline for cutting stimulus policy is under way. But another offsetting factor may have come this morning as well, in the form of some comments from New York Federal Reserve President William Dudley.
Stating that upcoming actions from the Fed may be more aggressive if there is a downward swing in the economic recovery's progress, Dudley signaled that there's no clear path toward tapering. Though Bernanke himself has stated that any decision to cut back on the current stimulus measures would be driven by the data, the market hasn't exactly taken his words to heart.
In and out
Personal income and consumer spending data was also released this morning, with Dow component American Express (NYSE:AXP) taking the pole position for the day's leaders. Following yesterday's downward revision of the country's economic growth, this morning's news that personal incomes rose in May by 0.5%, along with a 0.3% increase in consumer spending, was a welcome relief for the market. With its credit cards and other discretionary spending operations, AmEx is poised to benefit from a new surge of spending, which reached levels not seen since February based on the new data. And with most banks offering credit cards to their customers, there is sure to be a boost to that segment's revenue generation if the trend continues.