S&P Home Prices Rise 10.9% Beating Expectations

The 20-city S&P Case-Shiller house price index for March climbed 10.87% on the year. This beat expectations for a 10.2% rise.

This is also the fastest pace of increase since April 2006.

February's number was revised up modestly to show a 9.35% rise.

On the month home prices were up 1.12%, above expectations for a 1% rise. February's number was also revised up on a monthly basis to show a 1.32% rise.

Q1 home prices were up 10.17% on the year, beating expectations for a 9.6% rise. Q4's number was revised down modestly to show a 7.25% rise.

Both the 10 and 20-city home price indices are about 28 - 29% off their June/July 2006 peaks.

"Phoenix again had the largest annual increase at 22.5% followed by San Francisco with 22.2% and Las Vegas with 20.6%. Miami and Tampa, the eastern end of the Sunbelt, were softer with annual gains of 10.7% and 11.8%. The weakest annual price gains were seen in New York (+2.6%), Cleveland (+4.8%) and Boston (+6.7%); even these numbers are quite substantial."

Here is a look at the 10 and 20-city home price index since 1988:

S&P Case Shiller

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Bond Funds Are Getting Rocked Today

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PIMCO's Bill Gross

Following this morning's consumer confidence release, the yield on 10-year U.S. Treasuries rose to its highest levels in a year as investors sold out of government bonds.

Goldman strategists think this time the sell-off in bonds is "for real," and rates should continue heading higher from here.

This afternoon, bonds have extended their earlier losses, and the 10-year Treasury is now yielding 2.15%.

Closed-end bond funds traded on exchanges are taking a big hit today.

Perhaps the most notable is PIMCO's Dynamic Income fund, which is down 4.3%.

However, bond funds across the spectrum of PIMCO offerings are under fire.

PIMCO's High Income Fund is down 7.0%, the PIMCO Corporate & Income Opportunity Fund is trading 4.9% lower, and the PIMCO Income Strategy Fund is off 2.4%.

In a recent tweet, PIMCO fund manager Bill Gross said, "The secular 30-yr bull market in bonds likely ended 4/29/2013. PIMCO can help you navigate a likely lower return 2 - 3% future."

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TESLA $100

Electric car company Tesla is surging again pre-market.

And it's broken $100 for the first time.

As you can see in the table, via Yahoo Finance, the stock has almost quadrupled in the year, from a low around $27/share.

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Bonds Are Getting Smashed

10-year U.S. Treasury yields have risen to their highest level of the year this morning following a big upside surprise from the consumer confidence release.

Right now, they are trading around 2.10%, but moments ago, they hit a high of 2.11%.

Brean Capital Head of Rates Russ Certo says yields above 2.10-2.11% lead traders into a "technical vacuum area" to almost 2.25% on the chart.

Business Insider/Matthew Boesler, data from Bloomberg

The chart below shows how 10-year Treasury futures ran into some big selling this morning and are getting slammed following the consumer confidence release at 10 AM.

Thinkorswim

Click to enlarge

Right now, 10-year Treasury futures are down 0.6%. 30-year Treasury futures are down 1.2%.

Last week, Goldman strategists declared the latest sell-off in bonds "for real" this time.

This morning, at least, it seems like the bond sell-off is on.

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Goldman Has Mixed Feelings After Visiting Tesla (TSLA)

REUTERS/Brendan McDermid

Tesla is up over 6% today rising to as high as $104 per share at one point. The stock is up 204% year-to-date.

Some have argued that this drive up in prices is unwarranted.

Goldman Sachs' Patrick Archambault has a neutral rating on Tesla with a price target of $61.

Archambault recently visited Tesla's manufacturing plant in Fremont, California. Here are the key takeaways from the report:

Demand looks strong. In Europe, the order rate is about 200/week with "highest per-capita demand from Nordic countries." They expect Germany to become one of their biggest markets, and in Asia, they expect China to drive demand. In the longer-term they expect to sell 500,000 vehicles. The breakdown: "Gen 3 sedan (around 200K units), Gen 3 SUV (about 150K units), Model S/X (roughly 90K units) and the next Gen Roadster."On the production side the company reported a few improvements that should help support margins. 1. The number of temporary workers have decreased since the start of the year. 2. Less waste at supplier and production sites. 3. Full time employee work hours being lower to 40-50 hours per week, from 60-70 hours per week. 4. "Improvement in logistics costs."Revenue from GHG/CAFE Credits: It has been argued that Tesla's margins are driven by its zero emission vehicle (ZEV), greenhouse gases (GHG), and Corporate Average Fuel Economy (CAFE) credits. And that the many of these could disappear if the government changed its mind. "Tesla believes that revenues from these credits [GHG/CAFE] are far more reliable and sustainable than from the sale of ZEV credits," according to Archambault."The 25% gross margin target is more of a challenge, in our view." Tesla reported 17% gross margin in Q1. But some like Donn Vickrey at Gradient Analytics say the Q1 margin was closer to 5.7%, when excluding credits.

In recent weeks, Tesla has rallied on the back of an earnings beat, a secondary offering, a Consumer Reports review of 99/100.

But some argue that this is just a short squeeze, and there are many long-term questions about gross margins, credit sales, and warranty accruals that need to be addressed. 

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Brian Belski's Once Bullish S&P 500 Forecast Now Looks Bearish, But He Refuses To Budge

Many of Wall Street's top stock market strategists have been scrambling to crank up their forecasts after the S&P 500 blew past their targets.

But BMO Capital's Brian Belski isn't budging. He's sticking to his year-end target of 1,575, which he published in December. (He actually mentioned that target as early as September 2012.)

"Over the past 12 months, we have gone from defending our bullish stance with price targets at one point well above both market levels and consensus expectations to reconciling near-term caution," he wrote in a new note to clients.

Indeed, when the S&P started the year at 1,426, Belski looked optimistic.  With the S&P at 1,665 today, he's now looking a bit bearish.

"[W]e are becoming increasingly alarmed that very little analysis, process, and common sense are being utilized by many investors at current levels," he wrote in a new note to clients.

"From our perspective, the main reason for this abandonment is the thirst for performance and the instant gratification of portfolio gains – particularly considering the degree of fund manager underperformance over the past several years," he added. "After all, stronger periods of bull markets often feed on optimism and “the trend” is rarely not your friend. Consequently, fundamentals have a knack of taking the back seat when the pendulum swings from doubt to complacency, which clearly appears to be the case in the current environment."

Belski included this chart to show how this current bull market stands out in the history books.

BMO Capital

The low volatility of this rally has Belski increasingly concerned that a sell-off, should it come, could be a violent one (emphasis added):

Therein lies the biggest issue, in our view – we believe many investors are forgetting about the potential pain and downside risk associated with stock prices disconnecting from fundamentals. Keep in mind, the market rarely moves in a linear direction for long periods of time. In fact, sharp linear moves in one direction are typically met with even sharper linear moves in the opposite direction (once an inflection point is triggered). Our fear is that fundamentals will not catch up fast enough to support current prices and ultimately trigger a downside inflection point (let’s hope we are wrong). To that end, this week we attempt to answer and provide context for some of the more common questions/rebuttals we are receiving from clients with regard to our market targets and sector opinions.

Time will tell if he was right to be cautious.

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