INSTANT VIEW 2: New homes sales down; Chicago PMI up

NEW YORK (Reuters) - Sales of new single-family U.S. homes fell much more than expected to an annual rate of 647,000 in November, the slowest pace in more than 12 years, according to a government report on Friday.

New single-family home sales were down 9 percent from the downwardly revised pace of 711,000 in October. Analysts polled by Reuters were expecting a seasonally adjusted annual sales rate of 720,000.

HOUSING: The National Association of Purchasing Management-Chicago business barometer rose to 56.6 from 52.9 in November. Economists had forecast the index at 51.8. A reading above 50 indicates expansion in regional activity.

CHICAGO PMI:

KEY POINTS: * On Chicago PMI:The employment component of the index fell to 49.0 from 54.4 in November. * On Chicago PMI:Prices paid fell to 63.8 from 76.2 and new orders jumped to 58.4 from 53.9. * On new home sales:Sales in the U.S. Midwest were particularly weak, tumbling 27.6 percent to the slowest pace since July 1991.

COMMENTS:

JOHN SPINELLO, TREASURY BOND STRATEGIST, JEFFERIES & CO., NEW YORK:

"The data on new home sales was weak and the Chicago Purchasing Managers Index, although the headline was up, had some bond-friendly components like weaker employment and a drop in prices paid.

"The market had been strong to begin with, then backed off a little bit after hitting some resistance. It picked up a bid again on the weak new home sales numbers."

OWEN FITZPATRICK, HEAD OF U.S. EQUITY GROUP, DEUTSCHE BANK PRIVATE WEALTH MANAGEMENT, NEW YORK:

"It was below expectations and the revised number was lower, too, so it was a pretty steep decline. This points to the fact that the housing market is in a difficult situation. It's been a pretty consistent story throughout the fourth quarter. But you look at the Chicago purchasing index, and that came in above expectations, so it seems the economy is doing OK except for the housing sector.

"I don't think (the housing data) is a big surprise, but the (stock) market is definitely selling off and getting out of the high-beta names and getting into more defensive sectors...consumer staple names in particular."

JOSEPH BRUSUELAS, CHIEF U.S. ECONOMIST, IDEA GLOBAL, NEW YORK:

"The new home sales report was horrible and the Treasury market reacted appropriately with yields falling and prices rising. Demand for new homes continues to fall in an environment of price uncertainty. Consumers are behaving rationally and are willing to wait until the market approximates a bottom before moving back into the market for new homes. The inventory of new homes moved up to 9.3 months from 8.8 months. There are too many homes on the market that are currently overpriced.

"The Chicago PMI was a new order story and a backlog story. We got a real jump in new orders and the backlogs moved into robust category meaning orders that will be met in the final month of the year. There's demand in the manufacturing sector and I suspect that it's external demand, not domestic."

RON SIMPSON, DIRECTOR OF CURRENCY RESEARCH, ACTION ECONOMICS, TAMPA, FLORIDA:

"Despite the much less than expected new home sales print, based on early chatter the market appears to have been expecting a weak number. From here the dollar likely to edge lower but given the time of year and liquidity issues we don't foresee any clear trend in the short trend."

KURT BRUNNER, PORTFOLIO MANAGER, SWARTHMORE GROUP, PHILADELPHIA, PENNSYLVANIA:

"The Chicago PMI looks a little better than expected, and that gives you a bit of a lift after the durable goods number yesterday. You can say that the manufacturing is not falling off the cliff, and although we are seeing a slowdown at least the industrial side is going to keep supporting the economy."

MARKET REACTION: - BONDS: U.S. Treasuries extended gains after lower than expected November new home sales. - CURRENCIES: The euro initially little changed against the dollar, trading at $1.4692 soon after the report from about $1.4690 shortly prior. The dollar fell against the yen, trading at about 113.12 yen from about 113.25 yen shortly prior. - US STOCKS: Stocks pare gains on lower than expected new home sales.