Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.
Hold onto your seat because this doesn’t happen nearly enough anymore, but today’s U.S economic data and the strong move higher actually make sense. By that, I mean that lately we often see the market move higher despite negative economic data and lower on days when the data seems extraordinarily strong.
Helping move the broad-based S&P 500 higher today was positive housing data as well as another month of solid U.S. auto sales figures. On the housing front, the Mortgage Brokers Association reported that mortgage originations rose 1.3% last week — a very rare increase since 30-year mortgage rates hit their lows in early May. Higher originations would portend good news for homebuilders looking to move new housing inventory.
Better-than-expected U.S. auto sales from General Motors and Ford also served as a sticking point for today’s rally. In fact, all major automakers reported a double-digit increase in sales in the U.S. for August, with GM reporting a 15% increase in unit sales and Ford delivering a 12% increase. Perhaps the biggest surprise of all was Honda Motor and its 27% increase in unit sales over the previous year, but it’s all good news for the auto industry, which relies on consumer spending to drive its growth.
By the day’s end the S&P 500 had advanced 13.31 points (0.81%) to finish at 1,653.08, its second-straight day of gains.
Leading the charge higher today was brokerage firm E TRADE Financial Corporation (NASDAQ:ETFC), which gained 8.1% after announcing that its banking subsidiary will pay an ongoing $100 million dividend on a quarterly basis to its parent company. The move should allow E TRADE Financial Corporation (NASDAQ:ETFC) to finally begin paying down its debt and deleveraging its assets even further away from its mortgage portfolio, which still contains toxic assets. It’s a firm move in the right direction for E TRADE Financial Corporation (NASDAQ:ETFC), but still doesn’t represent a buying opportunity in my opinion until the credit quality of its loan portfolio improves further.