The US residential housing sector received a nice boost this morning as both Housing Starts and Building Permits for the month of June came in better than expected.  That’s the first time both reports have exceeded estimates in the same month since the January report earlier this year.  For each report, the actual reported number was more than 50K ahead of expectations and both readings were a four-month high.  So, after a few months of declines, June’s numbers provided a nice respite from the lackadaisical numbers.

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Taking a look at the internals of the report showed solid results.  For Housing Starts, the 8.3% m/m gain was driven by a 13.3% gain in multi-family units and a 6.3% gain in single-family starts.  For Building Permits, it was a similar picture as single-family permits increased 4.1%, while multi-family permits were up 13.9%.  It would have been preferable to see more of the gains coming from single-family units, but with both showing growth, we’ll take it.  On a regional basis, starts were strongest in the Northeast and Midwest, while permits showed the strongest m/m growth in the Midwest and West regions.

If there’s an economic indicator that gets released these days, taking the under usually ends up being the prudent bet.  Today’s release of homebuilder sentiment for the month of July from the NAHB on Tuesday was the latest example.  While economists were expecting the headline reading to come in at a level of 67, the actual reading was 64- the weakest reading since November.  After a four-month surge post-election, the last four months have seen homebuilder sentiment decline in three of the last four months.  Making matters worse, Tuesday’s reading was the weakest relative to expectations since May 2015.
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The table below breaks down July’s report by Present and Future Sales, Traffic, and Regions.  There wasn’t much to get excited about in July as every category of the report declined.  On a regional basis, sentiment was more mixed with relatively large declines in the Midwest and South but actually increases in both the Northeast and West.  Finally, Tuesday’s NAHB sentiment reading comes ahead of Wednesday’s report on Housing Starts, which has been weaker than expected for three straight months and Building Permits, which has missed the mark each of the last two months.

In the spirit of Mark Twain, the FANG stocks have roared back to life, definitively stating to the market that the reports of their demise have been greatly exaggerated.  On an equal-weighted basis (chart below), an index of the four FANG stocks (Facebook, Amazon.com, Netflix, and Google-parent Alphabet) has now completely erased its 8% pullback from its 6/8 high and is now back at new highs.  Over the last year alone, these four stocks are up an average of 45.7%.  Whenever there is optimism that the Trump Administration will get something passed, high growth tech stocks start to lose momentum, but once it looks like more of the same old Washington gridlock, high growth stocks like FANG really run.

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A lot of today’s strength in the performance of the FANG stocks on an equal-weighted basis is the fact that shares of Netflix (NFLX) are up over 12% following its strong earnings report after the close last night.  NFLX has a much smaller market cap than the three other stocks that make up the FANG group, but even on a market cap weighted basis, the four FANG stocks are still at new highs.  As shown below, a market cap weighted index of the four stocks has also more than erased what in this case was a 7% pullback and is also trading at new highs today.  So much for the death of FANG.