Live Markets: S&P Global assesses supply chains out of Israel

Tower Semiconductor

18/10/2023 17:07

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      Main U.S. indexes lower: Nasdaq weakest
    

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        S&P GLOBAL ASSESSES SUPPLY CHAINS OUT OF ISRAEL (1201
EDT/1601 GMT)
    As S&P Global Market Intelligence sees it, the impact on
supply chains coming out of Israel as a result of the current
conflict will depend on the escalation pathway.
    Analysts at S&P Global are saying that logistics
infrastructure at the port of Ashdod is the closest container
port to Gaza, and that at least one shipping line has indicated
that maritime traffic is operating normally as of Oct. 9.
However, S&P adds that air freight out of Tel Aviv airport may
be disrupted.
    Israel’s largest export lines include electronics,
healthcare and defense, which could face operational or
logistics disruptions in the event the conflict intensifies.
    According to the S&P Global analysts, Israeli suppliers
accounted for 14% of EU computer processor imports in the 12
months to July 31, 2023, shipped predominantly to Ireland by
fabricating facilities owned by Intel  INTC.O  and Tower
Semiconductor  TSEM.O .
    They add that Israel also exported $2.62 billion-worth of
telecom network equipment and $3.15 billion-worth of aerospace
equipment, including unmanned aerial vehicles (UAVs), in 2022 —
both led by shipments to Europe and the U.S.
    Exports of pharmaceuticals, worth $2.17 billion, are seen as
particularly susceptible to logistics network disruptions.
    However, S&P Global says that Israel’s importance to global
drug supply chains has fallen to 1.1% of U.S. imports and 0.8%
of EU imports as a result in part of reshoring by Israeli
pharmaceutical manufacturers.
    
    (Terence Gabriel)
     *****
    
    
    A HOUSE DIVIDED: HOUSING STARTS JUMP, MORTGAGE DEMAND HITS
LOWEST SINCE 1995 (1134 EDT/1534 GMT)
    Two seemingly contradictory bits of housing market data hit
the wire on Wednesday - housing starts rebounded, but mortgage
applications tanked.
    What gives?        
    Groundbreaking on new U.S. homes  USHST=ECI  rebounded by
7.0% last month to 1.358 million units at a seasonally adjusted
annualized rate (SAAR), landing 1.6% shy of consensus.
    Beneath the headline, starts in the multiple-unit segment
jumped 17.6% while single-unit starts, which account for the
lion's share of the total, rose 3.2%.
    The Commerce Department's report also included building
permits data  USBPE=ECI . Considered among the more
forward-looking housing market indicators, permits dropped 4.4%
to 1.473 million units SAAR, or 1.6% more than expected.
    Multiple-family permits tumbled 14.3% while single-family
permits increased by 1.8%.
    So considering skyrocketing mortgage rates and a dearth of
existing homes on the market, how does this jibe with the
surprisingly dour homebuilder sentiment reading from Tuesday?
    "Underneath the surface, there is trouble brewing in
housing," writes Jamie Cox, managing partner at Harris Financial
Group. "The accumulating effect of higher mortgage rates (and
interest rate costs for builders themselves) are denting
sentiment."
    "The last thing we need with a structural shortage of
housing is lower sentiment leading to lower building," Cox adds.
    
    
    Speaking of higher borrowing costs, demand for home loans
slid last week, with applications plunging to their lowest level
since 1995 as mortgage rates continued to press past
multi-decade highs, according to the Mortgage Bankers
Association (MBA).
    The average 30-year fixed contract rate  USMG=ECI  inched up
3 basis points to 7.70%, the highest level since late 2020. As a
result, applications for loans to purchase homes  USMGPI=ECI 
and refinance existing mortgages  USMGR=ECI  tumbled by 5.6% and
9.9%, respectively.
    "Homebuying activity continues to pull back given reduced
purchasing power from higher rates and the ongoing lack of
available inventory," says Joel Kan, MBA's deputy chief
economist.
    As shown in the graphic below, overall mortgage demand is
down 18.4% from the same week a year ago:
    
    
    (Stephen Culp)
     *****
    
    
    U.S. STOCKS WEAKER IN EARLY TRADE (1015 EDT/1415 GMT)
    Major U.S. averages are lower in the early stages of trading
on Wednesday, with the Dow Industrials  .DJI  on track to snap a
three-session win streak, while the S&P 500  .SPX  and Nasdaq
Composite  .IXIC  are both on track for a second-straight daily
decline. 
    Investors continue to eye the Middle East for any signs of
increasing tensions, as U.S. President Joe Biden arrived in
Israel on Wednesday pledging solidarity in its war against
Hamas, while the pace of the U.S. corporate earnings season
picks up. 
    Most S&P 500 sectors are lower early Wednesday with
materials  .SPLRCM  and industrials  .SPLRCI  taking the biggest
hits. Energy  .SPNY  is higher as oil prices climbed on the risk
of conflict escalating in the Middle East which sent Brent
 LCOc1  as high as $93 per barrel. 
    Consumer staples  .SPLRCS  is the only other S&P 500 sector
in the green, buoyed by gains in Procter & Gamble  PG.N  after
the maker of products such as Gillette razors and Oral-B
toothbrushes said it would achieve the higher end of its annual
sales and profit forecasts as consumers. 
    Weakness in United Airlines  UAL.O  is hitting industrials.
The stock is diving roughly 8% after it reported quarterly
results late Tuesday, and forecast weaker fourth-quarter
earnings due to higher costs. 
    Below is an early trade snapshot: 
    
     
    (Chuck Mikolajczak)
     *****
    
    
    S&P 500 INDEX: FULL DANCE CARD WITH CLOSELY FOLLOWED MOVING
AVERAGES (0900 EDT/1300 GMT)
    Over the past month or so, the S&P 500 index has been
dancing between key technical levels which include a number of
closely followed moving averages:
    
    
    Indeed, the SPX, which ended Tuesday at 4,373.20, is trapped
within a range which includes its 50-, 100- and 200-day moving
averages (DMA). 
    The descending 50-DMA and rising 100-DMA are resistance, and
should resides around 4,396 and 4,410 on Wednesday. The SPX hit
a high of 4,393.57 on Tuesday before backing away.
    Meanwhile, the rising 200-DMA should be around 4,228 on
Wednesday. The SPX's weakness into early October was contained
by this longer-term moving average. 
    On Wednesday, e-mini S&P 500 futures  EScv1  are suggesting
the S&P 500 index is poised to drop around 20 points, or 0.5%,
at the open.
    In any event, traders are also eyeing additional key levels.
    The 61.8% Fibonacci retracement of the 2022 decline is at
4,311.69. It contained last week's weakness.
    The 4,200 area remains significant. The early October lows
were at 4,216.45 and 4,219.55, and there is a rising weekly Gann
Line which is around 4,215 this week.
    The 23.6% Fibonacci retracement of the March 2020-January
2022 advance is at 4,198.70, and the early February 2023 high
was at 4,195.44.
    Closes back over the 100-DMA would be a constructive turn,
and ultimately, with enough strength and time, could turn the
trend in the descending 50-DMA back to the upside.   
    
    (Terence Gabriel)
     *****
 
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX10182023    https://tmsnrt.rs/3M4XWoi
Early trade Oct 18    https://tmsnrt.rs/3tuLqrG
Housing starts and building permits    https://tmsnrt.rs/3M5PK7m
MBA    https://tmsnrt.rs/45Dz9if
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)