MarketView for June 23

Summary

It was a quiet day on the Street on Monday with the major equity indexes essentially unchanged as there were few reasons for investors to buy or sell, although merger activity did help out the energy sector.

The S&P has had its longest streak of advances since mid-April, and both it and the Dow Jones industrial average were at record highs this past Friday. While Wall Street's uptrend is still viewed as intact, investors are looking for catalysts to deliver more robust gains, and recent economic data has been mixed.

May existing home sales rose at more than twice the rate of growth expected, while a preliminary read on June manufacturing hit its highest since May 2010. Other surveys of manufacturers gave positive signals for the global economic outlook, but dark clouds remained over Europe.

Energy shares were the day's strongest group, up 0.4 percent. Wisconsin Energy agreed to acquire Integrys Energy Group in a deal valued at $9.1 billion. Integrys was the S&P 500's largest percentage gainer, up 12.1 percent to end the day at $68.35, while Wisconsin fell 3.5 percent to $45.27.

A report released on Monday by the financial data firm Markit indicated that manufacturing expanded strongly during June. According to Markit its preliminary or "flash" Manufacturing Purchasing Managers Index rose to 57.5, the highest reading since May 2010, from 56.4 in May. A reading above 50 signals expansion in economic activity.

Oracle has agreed to purchase Micros Systems in a $5.3 billion deal. Micros rose 3.4 percent to $67.98 while Oracle rose 0.7 percent to $41.10.

Micron Technology was little changed in heavy after-hours trading after reporting third-quarter results. General Electric fell 1.1 percent to $26.86 while Boeing was down 0.9 percent at $130.85. Both are Dow components.

ParkerVision fell 63 percent to $1.85 after a federal judge overturned a jury verdict that ordered Qualcomm to pay $173 million for infringing patents. About 39 million shares changed hands, the greatest volume of trading in ParkerVision’s shares ever.

Approximately 5.07 billion shares changed hands on the major equity exchanges, a number that was below the month-to-date average of 5.63 billion shares, according to BATS exchange data.

Existing Home Sales Surprise

Existing home sales were higher than expected during the month of May and the stock of properties for sale was the highest in more than 1-1/2 years, suggesting that housing was pulling out of a recent slump.

The National Association of Realtors reported on Monday that existing home sales increased 4.9 percent to an annual rate of 4.89 million units. May's increase was the largest since August 2011.

The housing recovery stalled in the second half of 2013 as interest rates increased and prices surged against the backdrop of a dwindling supply of properties available for sale. And despite the second consecutive months of gains, sales were down 5.0 percent compared to May last year. They remain down 9 percent from a peak of 5.38 million units hit in July.

The sturdy housing report added to signs that economic activity has regained momentum after sliding in the first quarter.

While housing is showing tentative signs of recovery, progress will likely be slow. First-time buyers, a necessary ingredient for a strong housing market, continue to hug the sidelines. Many have also been priced out by stringent lending practices by financial institutions.

Last month, first-time buyers accounted for only 27 percent of the transactions, hovering near their lowest level since the Realtors group started tracking the series. A market share of 40 percent to 45 percent for first-time buyers is considered by many to be ideal.

The inventory of unsold homes on the market increased 6.0 percent from a year-ago to 2.28 million in May. That was the highest level since August 2012.

The month's supply of existing homes increased to 5.6 months from 5.7 months in April. Six months' supply is normally considered a healthy balance between supply and demand. Still, the improving supply is helping to temper price increases. The median home price increased 5.1 percent from a year ago to $213,400. That was the smallest increase since March 2012.