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David Becker

 

US stocks moved lower on Monday as concerns that a stimulus deal would need to wait until after the November general election weighed on shares. House Speak Nancy Pelosi has given the White House a 48-hour timeline to move forward with a deal. The spread of COVID-19 has accelerated which is reducing the chance of a V-shaped recovery.

Over the past 2-weeks, the stock market has been starting higher and ending lower, which is not a good sign. All sectors in the S&P 500 index were lower, led down by communications and energy, utilities were the best performing sector in a down tape. The VIX volatility index surged higher rising 2-points and recapturing the 29% level. The US home building index released by the FAHB surged to the high level on record but the gain was not strong enough to buoy housing sector stocks on Monday.

Home Building Index Surges

Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings.

The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74. Builders are struggling to ramp up production, and while housing starts and building permits are rising they are not even close to meeting demand.

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