Market Update
Existing Home Sales Declined 7.7% In November
Brian Turner
21 Dec, 2022
New York City
Existing home sales annual pace in November declined 7.7% to 4.09 million units from October, the National Association of Realtors reported Wednesday.
Sales plunged 35.4% from a year ago and weakest since November 2010.
Despite the weak sales median home sales price continued to advance, but at a slower pace.
Median home price rose 3.5% from a year ago to 370,700.
The inventory of unsold homes declined for the fourth month in a row to 1.14 million at the end of November or equivalent to 3.3 months of supply at the current pace of sales.
Home inventories decreased 6.6% from October but rose 2.7% from a year ago.
Earnings Optimism Lifts Major Averages On Wall Street
Barry Adams
21 Dec, 2022
New York City
Stocks on Wall Street advanced after FedEx and Nike reported weak but ahead of expectations results.
Investors also digested latest home sales data and larger-than-expected decline in weekly crude oil inventories.
Housing market continued to slow down and home sales dropped to the lows not seen since 2010 after elevated prices and mortgage rates kept buyers away.
The S&P 500 index increased 1.2% to 3,868.40 and the Nasdaq Composite index advanced 1.2% to 10,674.11.
The yield on 2-year Treasury notes eased to 4.21%, 10-year Treasury notes fell to 3.65% and 30-year Treasury bonds dropped to 3.71%.
Crude Oil Jumps After Inventories Reports
Crude oil futures jumped 2.5% to $77.85 a barrel after the U.S. inventories declined 3.1 million barrels last week from the 7.8 million barrels increase in the previous week, the American Petroleum Institute reported Tuesday.
U.S. crude oil inventories declined 5.894 million in the week ending December 16, the Energy Information Administration indicated in its weekly report released Wednesday.
Crude oil increased $1.43 to $77.68 a barrel and natural gas futures rose 16 cents to $5.48 a thermal unit.
Home Sales Declined 7.7% In November
Existing home sales annual pace in November declined 7.7% to 4.09 million units from October, the National Association of Realtors reported Wednesday.
Sales plunged 35.4% from a year ago and weakest since November 2010.
Mortgage Rate Eased Last Week
Mortgage rates for standard loans with 20% down payment decreased 8 basis points to 6.34% in the week ended December 16, the Mortgage Bankers Association report showed Wednesday.
U.S. Stock Movers
FedEx increased 4.8% to $172.12 after the parcel delivery company reported a decline in earnings but results were ahead of expectations.
FedEx revenue in the fiscal second quarter declined 3% to $22.8 billion and net income dropped to $788 million from $1.04 billion and diluted earnings per share fell to $3.07 from $3.88 a year ago.
Nike Inc soared 14.01% to $117.73 after the footwear maker and retailer reported better-than-expected quarterly results.
Revenue in the fiscal second quarter increased 17% to $13.3 billion and gross margin declined 300 basis points to 42.9%.
Net income in the quarter was flat at $1.3 billion and diluted earnings per share increased to 85 cents from 84 cents a year ago.
Inventories in the quarter increased 43% to $9.3 billion from a year ago but declined from $9.7 billion in the previous quarter.
Excess merchandise in the prior quarter led to above-normal discounting, negatively impacting gross margin.
Direct sales also increased 16% to $5.4 billion and digital sales rose 25%
Dutch front-month natural gas futures extended losses and dropped to one-month low and below
21 Dec, 2022
U.S. Stocks Snap 4-day Losing Streak, European Markets Wavered
Barry Adams
20 Dec, 2022
New York City
Stocks on Wall Street opened lower and bond yields inched higher after a selloff in the global bond markets.
The worldwide bond yields rose after the Bank of Japan lifted the upper limit of the target range, surprising financial markets.
The Bank of Japan also left its key lending rate at -0.1% but the widening of the yield range confirmed the central bank's readiness in ending six years of loose monetary policy.
The Bank of Japan is the last major central bank to adjust rate policy, following rate hikes by more than 10 central banks.
Despite the multiple rate hikes, real rates are still negative in G7 countries and not restrictive in limiting economic activities.
Moreover, investors are anticipating downward earnings revision as central banks are looking to dampen economic activities and tame 4-decade high inflation in the Euro Area and in the United States.
In addition, China is battling the fallout from the strict zero-Covid restrictions and deep financial turmoil in the property sector.
Stocks rebounded in afternoon trading and the S&P 500 and the Nasdaq snapped a 4-day losing streak.
Market Indexes Struggled to Gain Traction
The S&P 500 index declined 0.1% to 3,821.73 and the Nasdaq Composite index rose 0.01% to 10,547.11.
Crude oil inched up 49 cents to $75.83 a barrel and natural gas futures prices declined 54 cents to $5.32 a thermal unit.
The yield on 2-year Treasury notes increased to 4.27%, 10-year Treasury notes rose to 3.69% and 30-year Treasury bonds edged up to 3.74%.
U.S. Movers
Tesla Inc declined 6.6% to $140.10 on the China sales worries and CEO Elon Musk leadership at the company after his recent purchase of Twitter Inc.
General Mills, Inc declined 4.2% to %83.44 despite the company reporting higher sales and earnings in the last quarter but investors worried that nearly flat earnings were supported by a large price increase in North America.
Lucid Group Inc increased 0.7% to $7.29 after electric vehicle maker said it has raised $1.515 billion, including $915 million through a private placement and $600 million through the sale of stock "at-the-market" equity offering.
Quantumscape Corp increased 0.4% to $5.87 after the company said it has shipped its first 24-layer prototype lithium-metal battery cells to automotive OEMs for testing.
Housing Permits Plunge, Completions Rise
U.S. housing starts declined 0.5% to a seasonally adjusted 1.427 million annual rate after dropping downwardly revised 2.1% in October, the U.S. Census Bureau reported Tuesday.
Single family housing starts declined 4.1% to an annual pace of 828.000 and multi-family starts jumped 4.8% to 584,000.
Housing market is struggling under rising mortgage rates and record home prices, keeping many first time buyers away from the market.
November building permits declined 11.2% to a seasonally adjusted annual rate of 1.342 million from October and 22.4% below 1.792 million a year ago.
The monthly decline in permits was the largest since the pandemic era as home builders struggle with rising mortgage rates.
Housing completions increased 10.8% to a seasonally adjusted annual rate of 1.49 million from the revised October estimate of 1.345 million and 6.0% higher than 1.406 million rate a year ago.
European Markets Wavered, Natural Gas Volatile After Pipe Explosion
European markets pared losses and investors continue to assess the hawkish stance from the central banks and worry that rising rates and elevated inflation are likely to drag the economy into a recession.
The DAX index dropped 0.4% to 13,884.66, the CAC-40 index declined 0.4% to 6,450.43 and the FTSE 100 index inched up 9.31 points to 7,370.63.
Natural gas prices were volatile and traded as low as
Movers: Arch Capital, FactSet Research, General Mills, Loews Corp, Lucid, Newmont Mining, Steelcase
Scott Peters
20 Dec, 2022
New York City
Arch Capital Group increased 2.8% to $62.25 after the Bermuda-based insurance company expanded its share repurchase program to $1 billion.
The insurance company has repurchased $596.4 million of its stock as of September's end.
FactSet Research Systems Inc declined 2.9% to $407.41 after the financial data and analytics company reported weaker than expected revenues and earnings.
General Mills, Inc declined 4.2% to %83.44 despite the company reporting higher sales and earnings in the last quarter.
Revenue in the fiscal second quarter ending in November rose 4% to $5.22 billion after volume impacted sales negatively by 12 percentage points and price and mix change lifted sales by 17 percentage points.
In North America, revenues were negatively impacted by volume decline of 8 percentage points and price increase of 19 percentage points, leading to 11 percentage point increase in sales.
Net income increased 1% to $605.9 million from $597.2 million and diluted earnings per share rose to $1.01 from 97 cents a year ago.
Loews Corp increased 2.2% to $56.15 after the diversified company said Delaware Supreme Court has reversed an award of $690 million plus interest to minority unitholders in its Boardwalk Pipelines subsidiary.
This award was in connection with Loews
L3Harris Agreed to Acquire Aerojet Rocketdyne for $4.7 Billion
Scott Peters
19 Dec, 2022
New York City
Aerojet Rocketdyne Holdings Inc increased 1.6% to $55.77 after the company agreed to be acquired by rival L3 Harris Technologies for $58 a share.
Aerojet agreed to pay $4.7 billion in cash including net debt.
Aerojet generated $2.2 billion revenues in 2021 and earned $143.7 million or $1.75 a diluted share.
L3Harris annual revenue in 2021 declined 2% to $17.8 billion and $1.8 billion or $9.09 a diluted share.
In 2019, L3 Technologies merged with Harris Corp and strengthened military communication capabilities in networking and surveillance that are used in F-16, F-118 and F-35 fighter jets.
Aerojet has a funded backlog of $3.1 billion and an unfunded backlog of $3.7 billion of orders totaling $6.8 billion.
Aerojet Rocketdyne delivers a broad range of capabilities to support hypersonics, including solid rocket motor boosters, scramjets, warheads and missile defense technologies, according to the company website.
L3Harris decreased 3.5% to $205.76.
Lockheed Martin led the list of six largest defense contractors followed by Raytheon, Boeing, Northrop Grumman and General Dynamics and the top six contractors generated at least $12 billion in annual revenues from defense contracts.
The latest merger between L3Harris and Aerojet is the continuation of the merger between mid-tier contractors or large contractors snapping up mid-size companies following the growing military spending and stocks trading multi-year highs.
Steelcase Estimated Flat Revenues In Q4 Despite Price Hikes
Scott Peters
20 Dec, 2022
New York City
Steelcase Inc soared 12.3% to $7.02 after the furniture maker reported earnings and sales near the bottom-end of its guidance.
Revenue in the fiscal third quarter ending in November increased 12% to $826.9 million from $738.2 million a year ago.
Net income in the quarter increased 18.8% to $11.4 million from $9.6 million and diluted earnings per share rose to 10 cents from 8 cents a year ago.
Gross margin increased 120 basis points to 28.8% after the company implemented additional price increases.
The company had guided third quarter revenue between $825 million and $850 million and GAAP earning between 8 cents and 12 cents a share.
Segment Breakdown
of total revenues, Americas was 71.9% and Europe, the Middle East and Africa was 19.1% and Australia and Indo Pacific nations was 9.0%.
Revenue in the Americas increased 19% and EMEA region fell 6% and other region rose 7%.
Order Backlog
The company said order backlog at the end of the third quarter increased 3.0% from a year ago to $854 million.
Orders through the first three weeks of the fourth quarter declined approximately 6% compared to the prior year.
Outlook and Guidance
The company guided fourth quarter fiscal 2023 revenues in the range of $740 million and $765 million, compared to $753.1 million a year ago.
The company also estimated earnings per share between 5 cents and 9 cents in the fiscal fourth quarter, compared to a loss of 2 cents in the quarter a year ago.
Dividends
The board of directors approved 10 cents per share dividends on or before January 13, 2023 to shareholders on record January 3, 2023.
Housing Starts and Permits Fell but Completions Rose In November
Brian Turner
20 Dec, 2022
New York City
U.S. housing starts declined 0.5% to a seasonally adjusted 1.427 million annual rate after dropping downwardly revised 2.1% in October, the U.S. Census Bureau reported Tuesday.
Single family housing starts declined 4.1% to an annual pace of 828.000 and multi-family starts jumped 4.8% to 584,000.
Housing market is struggling under rising mortgage rates and record home prices, keeping many first time buyers away from the market.
Building Permits
November building permits declined 11.2% to a seasonally adjusted annual rate of 1.342 million from October and 22.4% below 1.792 million a year ago.
Housing Completions
November completions increased 10.8% to a seasonally adjusted annual rate of 1.49 million from the revised October estimate of 1.345 million and 6.0% higher than 1.406 million rate a year ago.