Momentum in equity markets came from an unlikely source on Tuesday: pending home sales. The pending home sales index is not typically a market-mover but came into the spotlight today after rising 6.7% from the previous month and 3.2% from April of last year. It was also the third straight month that the index has increased. After both new and existing home sales reported increases in April, the rising in the pending home sales index shows further signs of stabilization in the housing market. If the housing market is able to maintain demand, which is currently being driven by the government’s enhanced homebuyer tax credit and high levels of affordability, then hopes for an economic recovery may come much sooner.



Several indications show that conditions are improving. Money has started to flow back onto Wall St. Even with the recent bankruptcies at both GM and Chrysler, the S&P 500 index ended trading on Tuesday at its highest levels since November 5. Leading economic indicators in April recorded its first monthly increase since June 2008. Consumer confidence jumped in May to its highest levels since September. Homebuilder stocks have rallied while homebuilder confidence is also at its highest levels since September. While these signs are encouraging, the economy is most certainly not out of the woods yet. As we look forward to May’s employment report for further signs on the state of the labor market, the reorganization of the domestic automobile industry will likely put a damper on jobs and consumer spending in the near-term.



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