Afternoon Note
The stock market rally continues with the Nasdaq trading above 6000, a historic high, and the Dow once again is up triple digits on upbeat earnings reports and guidance, coupled with hope that tax reform is around the corner.
The Trump administration has announced tariffs of about 20% on Canada’s softwood lumber products to help level the playing field. The U.S government argues that Canada presents an unfair advantage to U.S. lumber producers (U.S. forest are private). Wilber Ross, U.S. Commerce Secretary, states that "The reason we're putting it on is because Canada's forests are owned by the various provinces and the provinces charge very discounted … prices to the lumbermen, which in turn lets them get subsidized low prices coming into the U.S."
Lumber prices are up 22% since the beginning of the year, in anticipation of some trade restriction or tariff. This increase may have an impact especially on new homes sales, as lumber represents about 8-12% of the price of a house, and may weigh on the already strapped first time and middle class buyer. The National Association of Home Builders estimates that the duty will increase the average single family home price by $1,236. While this may very well be good for U.S. lumber producers, Homebuilders are down on the day (plus Pulte missed).
Speaking of new home sales, March new home sales were up 5.8% to 621,000, the highest pace since July 2016 when it was 622,000, and prior to that it has not seen this level since January 2009. The demand for new homes remains strong, while prices continue to escalate as inventory/supply declines to 5.2 months from 5.4.
Financials and Materials are strong today while Consumer Staples, Real Estate, Telecom and Utilities lag. Advancers led decliners 2085/802 on the NYSE and 2051/731 on the Nasdaq.
Comments |
Though the tariff on Canadian lumber may seem excessive, I believe Pres. Trump is doing a great job of leveling the playing field with his various tariffs -- steel, etc. Carol Kaminski on 4/26/2017 7:12:15 AM |
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