Housing Market
Existing home sales for September rose 1.5% month-over-month to 3.99 million, beating the Street estimate of 3.95 million. The August figure was cut sharply, from 3.98 million down to 3.93 million, a drop of about 3.2% month-over-month. September offset that decline. Mortgage rates stay high, which slows both existing and new home sales. The consumer is standoffish about buying because of affordability, and that has hurt stocks tied to housing like Home Depot (HD) and Lowe's (LOW). The September move was a gradual bounce rather than a sharp rise, and sales remain at relative lows on the one-year chart.
Bank Earnings
The housing market also matters for banks because of lending. Results from the names reporting this morning were mixed, drawing a mixed market reaction. Weakness in fixed income trading hit Goldman Sachs (GS) and JPMorgan (JPM), while Citigroup (C) bucked the trend in that category. Consumer cards held up in some ways at Citi but missed estimates there. Equity trading was strong at both Goldman and JPMorgan.
JPMorgan and Goldman had warned about a month ago that they might see weak fixed income trading and slower investment banking. That is what JPMorgan's numbers showed. Citi surprised to the upside on some marks. The pattern with financials is a bullish pre-market reaction that fades through the equity session. Citi traded down about 2.25% and JPMorgan down about 7%. Nothing signals economic slowing, just weakness in pockets of the portfolio that had beaten the Street in recent quarters, mainly fixed income. Investment banking is slowing but that was expected. Some deals have been delayed to later this year or early next year; once they close, a bounce back in that activity is likely.
JPMorgan's guide came unusually late, about 45 minutes after the numbers, and reported to the upside. The stock sold off at first, then turned around, but later slipped back in the session. Goldman also slipped to the downside after helping the Dow earlier in the morning. For all the worries, the guides do not look too bad.
China's CXMT and AI Memory Stocks
Chips are facing what some call a "China scare 3.0" tied to CXMT. Follow-through appeared in South Korea's Kospi, which triggered a trading halt to the downside, with heavy selling in Samsung and SK Hynix. US markets followed through today.
Elon Musk weighed in, saying that if China figures out how to make a product, its ability to scale is often greater than the rest of the world combined. That came in response to an analyst who questioned the whole reaction, saying it made no sense and that CXMT still needs to prove itself.
The worry centers on the AI race among China, the US, and some European players. The fear is that memory turns into a commoditized business, as it has in the past, and demand falls off if China backfills its own supply shortage. Buyers are stepping into these names. SanDisk (SNDK) traded down about 3.3% but well off its lows, and AMD (AMD) made a small run higher. News headlines will keep moving these stocks.
The Philadelphia semiconductor index (SOX) is testing its 50-day moving average, with the MACD crossing into a bearish formation. This is a key moving average where you want to see buyers step in and retest the 20-day. South Korea's market has been volatile for a year to a year and a half, usually producing these small spats before buyers step back in and turn more bullish. Over the long term, commoditization and weaker memory demand are a real concern, and that cycle will hit the market. Whether it arrives in the near term or the next six to 12 months is what the market is trying to figure out.
More high-profile commentary has not helped, with figures like Hock Tan and Lip-Bu Tan pointing to capital as the next big constraint and to "casino-like" behavior where investors do not know what they are betting on.
S&P 500 Levels
The S&P 500 (SPX) keeps flirting with the 7,800 level, trading right at or just below it. The first area to hold is 7,800. A break lower points to 7,760 as support, with 7,820 to the upside. There is little room to the upside from a flow standpoint on the bullish side, so a digestion period around 7,800 is not surprising.
The key question is the market's underlying dynamics. Does the broadening rally continue with the S&P 500 equal weight outperforming the market-cap weighted index, or does a rotation start where buyers step into oversold groups like memory and other semiconductors while selling defensive sectors? These two have not moved in tandem over the past couple of months, and that split may be the next turn in the market over the coming weeks.
