Strong data drives modest gains

A day before the financial markets close for Christmas, US stocks have once again been lifted by upbeat data.

Stocks on Wall Street have today advanced from the record closing levels set by the Dow and S&P yesterday and by late-morning in New York, the Dow had achieved gains of 0.22% or 35 points at 16,329, while the more comprehensive S&P 500 index rose 0.23% to 1832.1.

Durable goods orders jumped 3.5% last month, bouncing back from October’s 0.7% drop (amended up from the 2.0% fall that was originally reported). Stripping out the volatile transportation component, orders were still up 1.2%, a result that surpassed the expectations of analysts polled by Reuters. This is good news for the manufacturing sector and suggests companies have greater confidence to invest now that they have put the government shutdown behind them.

New homes sales declined 2.1% in November to an annualised rate of 464,000, according to the US Commerce Department, while the Federal Housing Finance Agency said US house prices climbed 0.5% in October, the twenty-first consecutive increase in its purchase only house price index.

The drop in new home sales exceeded the expectations of economists and is an encouraging outcome in the context of stronger house prices and a tighter mortgage market, especially coming after October’s high levels (revised up from 444,000 to 474,000), while September was also revised higher, to 403,000 from an originally-reported 354,000.

These are the latest in an extended stretch of signs that the US economy is warming up and that means the Fed looks set to continue on its path of tapering. This is dollar-positive and has seen EUR/USD slip 0.2% today, while the dollar has strengthened 0.16% against the yen to 104.28, not far from a five-year high.

The UK financial market are closed until Friday, but the US markets are open on Boxing Day.

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