Stocks are lower this morning after the Houthis attack shipping in the Red Sea. Bonds and MBS are down. Market bellwethers Tesla and Google are weighing on the market.
The European Central Bank decided to keep rates unchanged but signaled a September rate hike is a possibility.
The Houthis are claiming they attacked two Saudi tankers in the Red Sea, although this hasn’t been confirmed. The UK reported that a projectile hit one of the tankers, causing a fire but no casualties. Meanwhile the US continued to hit targets in Iran and Trump is threatening to hit Iranian power plants and bridges if Iran continues to attack shipping in the Strait of Hormuz.
The increase in oil prices has the Fed Funds futures bumping up their forecast for a rate hike next week. The futures are now predicting a 36% chance of a 25 basis point increase. The December futures now see 2 rate hikes as the most likely outcome this year.
Homebuilder Pulte reported second quarter earnings of $2.48 per share compared to $3.03 in the same quarter a year ago. Revenues fell 11% due to a 8% drop in unit volumes and a 3% decline in ASPs. “Overall, market conditions remain highly competitive as macroeconomic uncertainty, volatile interest rates and strained affordability weigh on housing demand, but there are early signs that conditions may be stabilizing in select geographies around the country. Within this operating environment, we continue to execute focused, tactical adjustments as we work to balance price and pace within each community in support of delivering high returns across the enterprise.”
Gross margins increased 60 basis points sequentially but fell 200 on a YOY basis. New orders increased 6% overall and 5% for the first time homebuyer. On the earnings conference call, the company said that we are seeing stabilization and improvement in many MSAs that had been struggling:
Yes, John, we highlighted some of it in the prepared remarks. In all of our 5 regions that we report on, we saw positive year-over-year growth in 4 of them, the West being the one that I think is probably still the softest. Specific to the 4 where we saw some stabilization and I think some positive signs, I would definitely call out some of the Midwest markets. We continue to see strength there. We’re also seeing some favorable trends out of the Southeast markets.
We particularly like what’s going on in the coastal Carolinas markets in Greenville. And then look, I’ve got to highlight Florida again. Florida was up 19% year-over-year and a continuation of a theme that we’ve talked about for the last couple of calls, we’ve got great operating teams there and good assets, and we’re seeing nice performance there. I’m also encouraged by what we’re starting to see in Texas. I’m not ready to declare victory there, but the fact that we saw positive year-over-year orders, I think, is a good sign.
