What’s the Story?

by CC May 16, 2012 8:43 am • Commentary


Construction on new U.S. homes rose 2.6% in April to an annual rate of 717,000 units, while permits fell 7% to 715,000 one month after reaching a nearly four-year high, the government reported Wednesday. Economists surveyed by MarketWatch had expected housing starts in April to rise to total 690,000 on a seasonally adjusted basis. Housing starts in March were revised up sharply to 699,000 from 654,000, while permits were revised up to 769,000 – the highest level since September 2008 – from an original reading of 747,000. In April, permits for single-family homes, which account for three-quarters of the housing market, edged up 1.9% to an annual rate of 475,000. Permits for new construction are viewed as a gauge of future demand.

Calculated Risk

At 9:15 AM, the Fed will release Industrial Production and Capacity Utilization for April. The consensus is for a 0.5% increase in Industrial Production in April, and for Capacity Utilization to increase to 79.0% (from 78.6%).

• At 10:00 AM, the Mortgage Bankers Association (MBA) is scheduled to release the 1st Quarter 2012 National Delinquency Survey (NDS). This provides a breakdown of mortgage delinquencies by number of days delinquent, type of loan, and by state. Since the mortgage settlement was signed off on April 5th, there probably wasn’t any impact on Q1 delinquencies. I’ll be on the conference call at 10:30 AM and pass along any comments about the settlement, HARP, house prices, etc.

• At 2 PM, the FOMC Minutes for the meeting of April 24-25 will be released. From Goldman Sachs on things to look for:

We expect that the April FOMC minutes … will include a discussion of possible easing options. … The first set of options center around the Fed’s balance sheet, and we think that the discussion might include the benefits of mortgage purchases, the potential for more “twisting,” and the pros and cons of sterilized asset purchases.

• Also on Wednesday, the MBA will release the weekly mortgage applications survey, and the AIA will release the Architecture Billings Index for April (a leading indicator for commercial real estate).


Facebook Inc. boosted the size of its initial public offering to more than 400 million shares as major stockholders, including Chief Executive Mark Zuckerberg, sharply increased the number of shares they intend to offer in the hotly anticipated debut.

The social networking firm now expects to offer 421.2 million shares in its IPO, up from the 337.4 million shares previously expected.


From an intermediate perspective, the S&P 500 is 96.7% above the March 2009 closing low and 15.0% below the nominal all-time high of October 2007.


Deere & Co. [DE  76.62    -0.71  (-0.92%)   ]– The equipment maker reported fiscal second-quarter earnings of $2.61 per share, beating estimates by eight cents, with revenue also above consensus. The company says conditions are positive in the global farm economy, and raised its 2012 forecast.

Target [TGT  55.08    0.16  (+0.29%)   ] – The retailer reported first-quarter profit of $1.11 per share, excluding certain items, 10 cents above estimates, with revenue slightly above consensus. Second-quarter guidance of $1.04 to $1.14 per share is above current Street consensus of $0.99. The company says it’s pleased with first-quarter results, and is confident about the rest of the year despite continued economic uncertainty.

General Electric [GE  18.40    -0.20  (-1.08%)   ] – GE Capital has declared a $475 million dividend to parent GE, its first since the financial crisis in 2009. GE Capital plans to pay out 30 percent of its 2012 earnings as dividends to GE, as well as a $4.5 billion special dividend, subject to board approval.

Apple [AAPL  553.17    -5.05  (-0.9%)   ] – Dow Jones reports that Apple is ordering larger mobile phone screens from its suppliers, leading to conclusions that the next iPhone will have a 4-inch screen rather than the 3-1/2 inch screen that’s been used since the iPhone debuted in 2007.

Abercrombie & Fitch [ANF  45.40    -0.51  (-1.11%)   ] – The teen apparel retailer reported first-quarter profit of $0.03 per share, one cent above estimates, but sales fell below analyst forecasts. Abercrombie says it’s satisfied overall with its performance during the quarter, but does say it’s disappointed that European sales trends remain challenging.

Staples [SPLS  14.75    -0.34  (-2.25%)   ] – The office supplies retailer reported first-quarter profit of $0.30 per share, excluding certain items, matching Street estimates. Revenue was slightly below consensus forecasts. The company also kept its 2012 forecast unchanged, as it expects slow growth in the U.S. economy and soft demand in Europe.

J.C. Penney [JCP  33.32    -0.22  (-0.66%)   ] – The retailer reported an 18.9 percent drop in first-quarter same-store sales, a much bigger drop than Wall Street had expected. It also omitted its dividend, in what some view as at least an initial rejection of new CEO Ron Johnson’s makeover strategy.

General Motors [GM  21.42    -0.21  (-0.97%)   ] – Warren Buffett’s Berkshire Hathaway[BRK’A  121425.00    -250.00  (-0.21%)   ] has revealed a 10 million share stake in the automaker, according to the company’s latest 13F filing. GM also revealed that it does not plan to continue advertising on Facebook.

That filing also reveals a new Berkshire stake in Viacom [VIAB  46.99    -0.74  (-1.55%)   ], as well as increased stakes in Wal-Mart [WMT  59.35    0.28  (+0.47%)   ], Wells Fargo [WFC  32.24    -0.17  (-0.52%)   ], Bank of NY Mellon [BK  21.13    -0.27  (-1.26%)   ], and DirecTV [DTV  46.98    0.05  (+0.11%)   ]. It’s cut its stakes in Intel [INTC  26.88    -0.135  (-0.5%)   ], Kraft Foods [KFT  38.82    -0.22  (-0.56%)   ], Procter & Gamble [PG  63.72    0.14  (+0.22%)   ], and Dollar General [DG  47.00    0.18  (+0.38%)   ].

Safeway [SWY  18.78    -0.13  (-0.69%)   ] – The grocery store operator has raised its quarterly dividend by 21 percent to $0.175 per share from $0.145.

Arena Pharmaceuticals [ARNA  6.06    -0.55  (-8.32%)   ] – The drugmaker announced plans for a new common stock offering. It did not, however, say how much stock it might sell and at what price.

Liberty Media [LMCA  84.43    -1.31  (-1.53%)   ] has upped its stake in Live Nation Entertainment [LYV  9.27    0.17  (+1.87%)   ] to more than 25 percent from about 20 percent, according to a new SEC filing. Liberty has already received regulatory clearance to buy as much as 35 percent of Live Nation.

BHP Billiton [BHP  65.77    -1.69  (-2.51%)   ] – The company is predicting a continued slump in commodity prices, a factor that’s prompting the mining giant to cut back on investment plans that would have seen about $80 billion go towards new projects by 2015.

THQ [THQ  Unavailable      ()   ] – THQ reported a fiscal fourth-quarter loss, as the videogame maker tries to avert a stock de-listing. THQ is facing an uphill battle with a weak market and stronger, larger rivals like Electronic Arts [EA  14.31    -0.07  (-0.49%)   ] and Activision Blizzard [ATVI  12.78    0.14  (+1.11%)   ].

Fossil [FOSL  71.89    -5.35  (-6.93%)   ]  – Citi has upgraded the fashion accessories maker’s stock to “buy” from “neutral”, citing its “beaten-up” valuation.

Cisco [CSCO  16.54    -0.165  (-0.99%)   ] – Barclays has upgraded the networking equipment maker’s shares to “overweight” from “equal weight”. The firm says the stock offers material appreciation if the economic picture is steady, downside protection if it isn’t.