MarketView for April 22

Summary

The major equity indexes moved higher on Monday as last week's sharp losses brought buyers back to the market. Microsoft gained ground after an activist investor took a stake in the company. Lifting the S&P 500 and the Nasdaq, Microsoft ended the day up 3.6 percent to close at $30.83 after CNBC reported that ValueAct Capital had purchased a $2 billion stake in the company.

Shares of Caterpillar rose 2.8 percent to $82.71, helping the Dow after the company said a pullback in spending by mining companies was temporary. The stock's gains came despite a lowered 2013 outlook from the world's largest maker of construction and mining equipment.

The market’s gains came on the heels of the S&P 500's worst weekly loss since November giving rise to comments that a so called market correction has yet to arrive. S&P 500 earnings growth is forecast at 2.2 percent for the first quarter, based on results from 21 percent of the companies and estimates for the rest, Thomson Reuters data showed. That is up from an April 1 forecast of 1.5 percent growth.

Google, which fell as much as 3.1 percent within the first 10 minutes of Monday's trading session, ended up 0.03 percent at $800.11. On Friday, Google had gained 4.4 percent after the company had posted upbeat results.

Energy and materials shares were among the best performers of the day on the S&P 500, bouncing back from last week's big losses. The S&P 500 energy index was up 1 percent, with the materials index also up 1 percent. The S&P technology index .gained 0.9 percent.

Among other gainers, shares of Halliburton rose 5.6 percent to $39.29 after the company posted quarterly results and said it is in talks to settle private claims against it in a trial.

After the bell, shares of Netflix rose 25 percent to $218 following the release of its results. Meanwhile, shares of Texas Instruments were up 0.1 percent at $34.83 after it posted revenue and earnings that were slightly ahead of Wall Street expectations.

Approximately 5.6 billion shares changed hands on the three major equity exchanges as compared with the average daily closing volume of about 6.4 billion shares this year. That is a decline from much of last week, when overall volume was higher than normal. It averaged 7.3 billion shares traded for the five sessions.

Decline in Existing Home Sales

Existing home sales moved lower in March, pointing to some slowdown in the housing market’s recovery pace as overall economic activity cools. The National Association of Realtors said on Monday existing home sales slipped 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units.

Nonetheless, the housing market recovery that has helped boost the economy remains intact, and there is some evidence the slowdown in sales may represent supply constraints more than crimped demand.

Sales in March were 10.3 percent higher than the same month last year, and the median price for a home resale was up 11.8 percent, the biggest increase since November 2005, to $184,300.

The supply of existing homes on the market for sale rose 1.6 percent during the month to 1.93 million, which represented 4.7 months' supply at March's sales pace, up from 4.6 in February. That is well below the 6 months' level normally considered as an ideal balance between demand and supply. A year earlier, the inventory of unsold homes was 2.32 million, a 6.2 months' supply.

More homes are expected to go on the market next month ahead of the summer buying season, said NAR economist Lawrence Yun. Still, the drop in inventory of homes for sale compared with the prior year signals it may be pinching sales.

Sales of higher-priced homes have shown larger gains over the past year in comparison with those properties below the $100,000 range, the NAR said. Those homes priced above $500,000 are showing a 25 percent better pace of sale while those below $100,000 have seen sales drop 16 percent from a year ago.

At the same time, the share of distressed sales, which also include those where the sales price was below the amount owed on the home, has decreased and accounted for 21 percent of home re-sales last month. That was down from 25 percent a month earlier, and was the lowest since the NAR began tracking the number in October 2008 as the foreclosure crisis escalated.

Distressed sales are on the decline as home prices move upwards and supply dwindles. Many investors have snapped up properties at deep discounts since the housing bubble burst, taking advantage of cheap borrowing costs and affordable prices.