Beginning construction of U.S. homes rose more than forecast in June to the fastest rate in almost four years, indicating a brighter outlook for the residential real estate market.
Housing starts rose 6.9 percent last month to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate. Building permits fell, reflecting a drop in applications for apartment construction.
Bank of America Corp reported a second-quarter profit on Wednesday as the second-largest U.S. bank cut costs and reduced reserves for loan losses.
Net income was $2.5 billion, or 19 cents a share, compared with a loss of $8.8 billion a year earlier, when the bank took $20.7 billion in mortgage-related and other charges.
Federal Reserve Chairman Ben Bernanke will testify to Congress for a second day, this time to the U.S. House Financial Services Committee, but is expected to mostly repeat what he said to the Senate Banking Committee on Tuesday.
In corporate news, shares of Intel lost 0.9% after the blue chip semiconductor maker lowered its full-year revenue-growth outlook, citing a more challenging macroeconomic environment. For the second quarter, Intel earned more than expected; revenue was in line with forecasts..
Meanwhile, fellow Dow component Bank of America rose 0.6% after the banking giant reported second-quarter earnings that exceeded analyst forecasts. Loan-loss provisions declined and credit quality continued to improve. Revenue rose from last year but fell short of expectations.
European markets moved slightly higher, with the Stoxx Europe 600 up 0.2%, after news that U.K. unemployment declined. For the three months ending in May, the U.K. unemployment rate fell to 8.1% from 8.3% in the previous three-month period. The FTSE 100 index inched up 0.1%.
Spain’s IBEX-35 index fell 0.5%, however, in response to news that bank deposits declined by a record amount in May from a year earlier. Bad loans increased for a 14th consecutive month.
Asian markets were mostly lower, with Japan’s Nikkei Stock Average down 0.3% and Australia’s ASX 200 lower by 0.4%. China’s Shanghai Composite bucked the trend, however, rising 0.4%.
Crude-oil futures slipped 0.3% to $88.94 a barrel, while gold futures declined 1.1% to below $1575 an ounce. The U.S. dollar rose against the euro, but slipped against the yen.
In other corporate news, Yahoo slipped 0.1% after the Internet company reported second-quarter earnings that beat estimates, while revenue fell a touch shy.
Honeywell gained 1.3%. The company reported second-quarter earnings that were above estimates, and raised the lower end of the range of its full-year earnings outlook.
Vivus surged 19% after the company said the U.S. Food and Drug Administration approved the company’s weight-loss drug Qsymia.
VMware climbed 6.5%. The virtualization-software company announced preliminary revenue and adjusted operating margins that were above the ranges it had forecasted earlier. Separately, the company said Pat Gelsinger, currently the president and chief operating officer at EMC, was appointed chief executive, effective Sept. 1.
EMC rose 5.9% after backing its full-year earnings and revenue outlook while reporting preliminary second-quarter earnings that were slightly below estimates and revenue that was marginally above. The company also said VMware’s current CEO, Paul Maritz, will join as chief strategist, effective Sept. 1.
Rovi tumbled 27%. The digital entertainment company provided a preliminary second-quarter earnings and revenue outlook that was well below analyst projections. It lowered its forecasts for the full year.
Mr. Bernanke repeated the Fed’s June assessment that economic growth has slowed, and is likely to remain slow. And he renewed his warning that scheduled tax increases and spending cuts would tip the economy back into recession.
Rather than committing to new steps, Mr. Bernanke told the Senate Banking Committee that the decision would turn on the judgment of Fed officials about the pace of job growth in the coming months.
The major issue, he said, is “whether or not there is in fact a sustained recovery going on in the labor market, or are we stuck in the mud?” Mr. Bernanke added a wrinkle, saying the central bank “would certainly want to react against any increase in deflation risk.”
With the unemployment rate stalled above 8 percent and some measures of inflation expectations falling, some analysts read Mr. Bernanke’s remarks as indicating action was likely in the coming months. The next meeting of the central bank’s top policy committee is late in July.
Major stock market indexes fell immediately after Mr. Bernanke’s prepared remarks were made public but gradually rose as he took questions and seemed more open to additional stimulus.
But Mr. Bernanke’s cautious language underscored the Fed’s reluctance to ride again to the aid of a plodding economy. The central bank has intervened repeatedly to prevent backsliding into recession, and Mr. Bernanke repeated his standard promise to maintain that vigilance. But the Fed has not acted with similar urgency to reduce the persistently high rate of unemployment.
Mr. Bernanke also noted the Fed could take other steps, such as indicating that short-term interest rates would remain near zero beyond the end of 2014.
“We are looking for ways to address the weakness in the economy, should more actually be needed,” he told the committee.