The sale on the U.S. stock markets was gaining momentum yesterday. Dow Jones Industrial Average fell by 2.4%, S&P 500 lost more than 3%, and NASDAQ Composite plunged by 4.4% in just one trading session. Increased volatility has returned to the markets following the disappointment reports from chipmakers STMicroelectronics NV ADR (NYSE:STM) (-6.6%) and Texas Instruments (NASDAQ:TXN) (-8.2%).
Moreover, the housing market attracts more and more attention in the latest months. The data published on Wednesday reflected the decline in New Home Sales by 5.5% to lowest levels in almost 2 years. For today the release of the index of Pending Home Sales is scheduled, and another weak figure of sales can increase worry of investors.
On the one hand, it is hardly expected that banks and homebuyers will quickly forget the lessons of the previous decade. At the peak of the cycle in 2005, the sales of new homes were two and a half times higher. Now, banks and households are likely to be careful about issuing mortgages, despite the lower interest rates. However, stagnation and even declining sales are causing excitement. Earlier this data served as an excellent leading indicator of the consumer activity. The current recession is seen as a harbinger of falling household spending in subsequent quarters.
The upcoming publication of Durable Goods Orders is another indicator of the Business confidence. The impressive growth of orders for expensive equipment with long-term use reflects confidence in economic prospects and can reduce the degree of anxiety around the prospects of the U.S. economy because of the weakness of the housing market. The indicators of stronger expectations can support USD and the US stock indices.
In addition, the focus of the markets on Thursday is ECB’s conference. The speech by the President Mario Draghi very often causes the increased volatility of the single currency, as the head of the bank gives answers to the most burning questions of journalists. This time, there will probably be questions about the influence of the Italian situation on the plans to minimize QE and higher rates.
The EUR/USD pair on Wednesday lost 0.7%, falling to 1.1390 overnight. On Thursday, it finds some support near the psychologically important level on 1.1400, but the trading activity is reduced in anticipation of the ECB press conference.
