Housing Starts Jump, Building Permits Decline in June

Pre-market futures are down on the major indexes this morning, threatening a down-week of trading overall. Following yesterday’s trading session in the red, the Dow is -346 points, the S&P 500 is -71 and the Nasdaq -561. The small-cap Russell 2000 is -24 points down at this hour.

Investors continue booking profits on the AI trade, especially overseas — particularly Asia (-4% and -6.5% on the Tokyo and Taiwan Stock Markets, respectively, overnight) — on concerns over high capex spending. Also, in yesterday’s Netflix (NFLX) earnings report, a weaker revenue outlook has sent shares down -11% ahead of the opening bell.

Housing Starts, Building Permits Move in Opposite Directions

June Housing Starts are out ahead of today’s open, with a big bounce to 1.427 million seasonally adjusted, annualized units last month, rebounding nicely from the slightly upwardly revised 1.19 million for May. That said, this growth was led by a big surge in Multi-family housing, +76%, offset a slight drop in Single Family (which hold greater benefits for the overall economy).

Rents are coming up while vacancies are down: this was a recipe for homebuilders to make more apartment buildings available. Also, the costs for Single Family housing are everywhere — not least in the stagnant +6.6% 30-year fixed mortgage rates last month. Earlier this week, Homebuilders Confidence remained down in the 30s for the 15th-straight month; a 50 level indicates positive sentiment.

Building Permits came in at their lightest levels since March of this year: 1.367 million seasonally adjusted, annualized units, down from the unrevised 1.41 million the prior month. Permits fell in the South and West regions of the U.S., while gaining in the Midwest and up double-digits in the Northeast. They were also lower for both Single Family and Multi-family structures.

Import Prices Stay Positive, Exports Dip

Analysts had expected June Import Prices to slide to a negative print this morning, following two straight months of higher-than-average numbers. At +0.3%, we’re at the lowest levels of the year so far, led mostly in the overall decline of oil prices once the Strait of Hormuz opened up mid-last month. Ex-fuel, +0.5% was 10 basis points (bps) higher than expected. Year over year, however, we see +7.1% — the hottest read since August of 2022 and 60 bps ahead of expectations.

Meanwhile, Exports did drop into negative territory, -0.6%, for the first time since May of last year.  Year over year, these tallied +10.2%: in-line with estimates but down from the previous +11.2%, which was the warmest print since the summer of ’22. Non-agricultural exports led the downward pricing for June.

What to Expect from the Stock Market Next Week

We quiet down significantly on the economic data front beginning Monday, but we pick up Q2 earnings reports in a big way. In fact, based on ongoing concerns within the AI trade presently, we may see results that help put out the fire next week, with quarterly results due from Alphabet GOOGL, Intel INTC, IBM (IBM, among others. Either that or we’ll see the outline of the AI weakness several analysts have been forecasting for the past couple quarters.

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This article originally published on Zacks Investment Research (zacks.com).

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