Home Builders Advance

123jump.com Staff
23 Mar, 2006
New York City

Market averages remained under pressure on twin economic reports. Sales of existing home rose 5.2% in February on warm weather and labor market reported 11,000 lower claims for the previous week. Interest rates worries pushed index at mid-day near lows for the session. Home buidlers registered a strong advance. Gasoline prices rose as crude rose. Mexico and Brazil suffered losses. S&P plans to add Google to S&P 500 index at the end of March replacing Burlington Resources.

[R]4:15PM MARKET AVERAGES DECLINE BUT HOME BUILDERS RISE.[/R]

- Dow down 47.14 points, Nasdaq down 3.20 and S&P down 3.37.
-Crude oil rose $2.14 or 3.5% to $63.91.
-February Existing home sales at 6.91 million up 5.2%.
-Unemployment claims decline by 11,000 to 302,000 for the last week.

[R]Home Builders and Energy stocks rise.[/R]
Stock market three indexes registered losses as market encountered a wave of selling and rising energy prices. Healthy job market report and existing home sales report sparked a concern that the interest rates may have to rise more and over a longer time horizon.

Sales of existing homes rose more than expected in February sparking a rise in home builder stocks and worries of the rising interest rates. KB Homes, Beazer Homes, Ryland Homes and Toll Brothers rose at least 4%. Interest rate for the 10-year bond rose to 4.74% up from 4.7% close yesterday. Energy stocks advanced in the face of better than 3.5% rise in crude oil price. Drillers, explorers, service providers and refiners led strong advances. National Oil Well ((NOV)) rose 4%, Murphy Oil and ConocoPhillips rose 1.1% and refiners Valero Energy and Tesoro rose 2% and 1.2% respectively.

Of the 30 Dow components only Home Depot ((HD)) and Wal-Mart Stores ((WMT)) managed to gain more than 1%. Eleven other Dow components lost at least 1% led by 1.6% loss in Proctor & Gamble ((PG)). Jabil Circuit ((JBL)) rose 12% on better-than-expected earnings and broker upgrades with a new price target of $48. Yahoo ((YHOO)) rose 3% on broker upgrades and comments that valuations of the stock ay rise in the near future.

Advanced Micro ((AMD)) rose as much as 4% before settling to a rise of 2% on the purchase of a game server company which uses AMD and Intel chips by Dell. The purchase sparked hopes that this will bring Dell and AMD closer and may help in selling microprocessor chips to Dell. Florida based cruise ship operator Carnival Cruise ((CCL)) declined 6% on 19% drop in earnings on 63% increase in fuel cost. Chicago Board of Trade lost 10% and Getty Images lost 3% and the stock is down 15% from all-time high and Apple Computer traded below $59 but managed to close at $60.16.


[R]3:30PM Emerging markets in Europe rise but in Latin America slide.[/R]
Markets in Russia, South Africa and Turkey rose 1.52%, 0.83% and 0.56% on general strength in the larger European markets and in crude oil, natural gas and metals prices in Europe. In Latin America markets in Brazil, Mexico and Argentina weakened by 1.53%, 1.14% and 0.06% near close. Chilean Index rose 0.15% and index in Venezuela gained 0.22%. Brazil lost momentum today on worries related to rising rated in the U.S. and unknown political damage of the graft scandal investigation. Petrobras led the decliners and gainers were hard to find. Mexico index fell for the first time after rising for the eight session in a row. IPC index traded in a volatile fashion for two days now after creating three all-time high records last week. American Movil ((AMX)) and Homex ((HMX)) lost 1%, Cemex ((CX)) down 2% but Fomex ((FMX)) gained 0.5% during the session.

In the Middle East indexes traded mixed after a choppy two weeks of trading. Morocco index rose 1.6% and led gainers in the region and Dubai lost 0.94% and led the decliners. Indian market after trading near all-time high of 11,000 yesterday and for the most part today lost a fraction on the news that Sonia Gandhi, ruling Congress party leader was forced to resign from her Parliament seat. Pakistan, Honk Kong and Thailand led the gainers in the region with a rise of 1.33%, 0.82% and 0.73% respectively.


[R]2:30PM Natural gas rise on inventory report.[/R]
In the metals market gold fell but silver, copper and platinum rose near market close. Gold fell to $550 per ounce down 80 cents and is likely to trade lower in the coming days if U.S. dollar maintains its rise if interest rates go up. Silver rose to a new peak $10.70 and settled a cent lower. The silver market is experiencing tighter demand and supply conditions than the gold market and is likely to rise in the coming months. Copper has been on the upswing since the beginning of the year and rose 5.9 cents to a new high for May contact $2.399 per pound. Rising copper prices are supported by a perceived rise in demand from China and tight inventory supplies worldwide. Crude oil rose as much as 3% to $63.60 and gasoline traded down and with no direction. Natural gas rose as much as 4% on the news that gas inventory fell by 23 billion cubic feet.


[R]12:30PM European markets closed mixed.[/R]
European markets closed mixed, reflecting declines in retail and utility stocks which offset strength in the mining sector. Miners like BHP Billiton and Rio Tinto gained on continuously strong metals prices. The German DAX 30 advanced 0.3%, the French CAC 40 was flat at 5,194 and London FTSE 100 was down 0.3%.

Crude oil prices climbed a day after a government report showed shrinking U.S. oil supplies. Light sweet crude May delivery surged $1.23 to $63 a barrel. Gasoline gained 4 cents to $1.775, while heating oil was steady at $1.7442. Natural gas climbed 25 cents to $7.20 per 1,000 cubic feet. London Brent for May delivery rose 58 cents to $62.08 a barrel. European gold traded lower on strong U.S. dollar. In London gold traded at $546.70, down from $550. In Zurich the precious metal fell to $546.80 from $549.70. In Hong Kong gold dropped $3.10 to $549.30. Silver closed unchanged at $10.50. The U.S. dollar advanced against other major currencies. The euro traded at $1.1989, down from $1.2079. The dollar bought 117.64 yen, up from 116.85. The British pound was quoted at $1.7334, down from $1.7468.

[R]11:30AM Transportation stocks declined.[/R]
Disappointing guidance from Adobe Systems and renewed interest rate concerns, raised by better-than-expected home sales and jobless claims reports, sent stocks in the negative. For the second day in a row the tech sector came under pressure. A day after Microsoft said it will delay the release of its operating system, software maker Adobe warned that current profit and revenue could fall short of analysts' estimates. Brokerage RBC Capital Markets downgraded Adobe ((ADBE)), whose shares dropped 2.6%. Internet company Yahoo Inc. ((YHOO)) added 3% after banks upgraded their investment ratings on the stocks. Transportation stocks erased most of the gains posted on Wednesday to turn into the worst performer in early trading. Trucking stocks contributed with heavy losses to help drag the sector lower. The most notable loser among them was YRC Worldwide ((YRCW)), falling 14.8% on lowered Q1 guidance. Health care and defense stocks were also weak in morning trading. Among defense stocks, Dow components Boeing ((BA)) and United Technologies ((UTX)) posted significant losses. The most conspicuous advancers were oil service stocks, which benefited from a notable increase in the price of oil. Shares of energy company ConocoPhillips ((CNOOC)) rose 1.3%. Housing stocks also made a good performance, following an upbeat existing home sales report. Shares of home builder KB Homes (KBH)) rose 2% after reporting better than expected Q1 earnings growth and reaffirming its full year guidance. Semiconductor, disk drive, gold, and natural gas stocks posted modest strength.

[R]10:30AM Stocks sharply declined on profit taking.[/R]
In the opening hours stocks traded in a lackluster fashion, with averages hovering near the flat line but for the last hour they have been deeply in the negative territory. Recovering from recent weakness, semiconductor stocks showed some strength with the sector posting 1.4% advance in early trading. Advanced Micro Devices ((AMD)) stood out among advancers with a notable gain of 4.5% on news that the company may benefit from Dell's ((DELL)) acquisition of Alienware. Oil service stocks also moved to the upside, following an increase in the price of oil with sector is currently up 1.9%. The transportation sector suffered some profit taking with the Dow Jones Transportation Index currently down 1.6%, reversing from Wednesday's gain of 1.3%. Airline stocks helped the sector down after a strong performance in the previous session. Health care stocks were also under pressure. HMO, biotechnology, and pharmaceutical sectors posted significant declines. Humana ((HUM)) and Aetna ((AET)) posted notable losses among HMO stocks. King Pharmaceuticals ((KG)) dragged the drug sector lower, falling 3.7% after the company announced a private offering of $400 million of convertible senior notes due 2026. Weakness also emerged in the defense sector, falling 0.8%, with DRS Technologies ((DRS)) and Raytheon ((RTN)) being the worst performers.

[R]10:00AM Stocks opened lower on Adobe quarterly results and economic data.[/R]
Stocks opened in the negative on a disappointing earnings report and outlook from Adobe Systems and a government report that showed unemployment claims fell at a greater-than-expected rate. The report raised concerns over inflation and further interest rate hikes. In the first hour of trading, the Dow Jones industrial average fell 5.61, or 0.05%. The Standard & Poor's 500 index fell 1.39, or 0.11%, and the Nasdaq composite index fell 2.84, or 0.12%. Bonds rose, with the yield on the 10-year Treasury note falling to 4.69% from 4.70% late Wednesday.

[R]Existing home sales rose 5.2%.[/R]
The National Association of Realtors released its report on existing home sales in the month of February on Thursday, showing that sales rebounded following five months of declines. NAR said the increase indicates that a stabilization is taking place in the market. The report showed that existing home sales rose 5.2 percent to a seasonally adjusted annual rate of 6.91 million units in February from an upwardly revised 6.57 million unit rate in January. Economists had expected existing home sales to edge down to a 6.50 million unit rate. The increase in existing home sales reflected growth in the Northeast, the Midwest, and the West, while sales in the South fell 2.5 percent. The report also showed that the national median existing-home price rose to $209,000 in February, up 10.6 percent from February 2005 when the median was $189,000. NAR added that total housing inventory levels rose 5.2 percent to 3.03 million existing homes available for sale at the end of February. This represents a 5.3-month supply at the current sales pace, which is unchanged from January.

[R]9:00AM Futures pointed to a lackluster start on disappointing outlook from Adobe.[/R]
U.S. stock futures indicated a flat to lower start Thursday, reflecting gains in Yahoo shares and a disappointing report from software maker Adobe Systems. The lackluster opening would follow a strong performance yesterday, when stocks recovered from early tech weakness to end higher with the Dow rising to a five-year high. Shares of Yahoo ((YHOO)) rose 1.8% before the bell on news that UBS raised its investment rating on the company. After gaining ground yesterday, tech stocks are expected to show weakness after Adobe ((ADBE)) shares fell 3.6% in pre-market trading on a disappointing outlook which came after news that Microsoft Corp. decided to delay its new operating system. Adobe reported Q1 net income of 32 cents per share, which beat analyst estimates of 29 cents per share, but the company released a disappointing Q2 guidance. Standard & Poor's 500 futures were down 1.5 points, but were about even with fair value. Dow Jones industrial average futures were down 7 points, and Nasdaq 100 futures were down 2 points.

Crude oil prices moved higher Thursday, reflecting an unexpected drop in U.S. oil inventories. Light sweet crude May delivery rose 88 cents to $62.65 a barrel. London Brent trading was suspended by the ICE Future Exchange without reason provided.

[R]Initial jobless claims unexpectedly fell.[/R]
The Department of Labor released its report on initial jobless claims in the week ended March 18, showing that jobless claims came in below economist estimates. However, the report also showed a continued increase by the less volatile four-week moving average. The Labor Dept. said that jobless claims fell to 302,000 from the previous week's revised figure of 313,000. Economists had been expecting jobless claims to fall to 305,000 from the 309,000 originally reported for the previous week. As mentioned above, the report also showed that the four-week moving average rose for the fourth consecutive week, increasing to 303,500 from the previous week's revised average of 297,500. With the increase, the moving average rose above the 300,000 level for the first time since the first week of 2006. The report also showed that continuing claims in the week ended March 11 rose to 2.472 million from the preceding week's revised level of 2.434 million.

[R]8:30 AM A batch of companies underperformed.[/R]
Fred's Inc, ((FRED)), retailer, reported Q4 net income of 24 cents a share, down from 27 cents a share a year ago despite sales growth, missing analyst estimate for a profit of 27 cents a share. The company added that profits were hurt particularly by weakness in its pharmacy sales.

ConAgra Foods Inc, ((CAG)), packaged-food company, reported that it reversed to a Q3 loss of 6 cents a share, from a profit of 32 cents a year-earlier. If not for charges for restructuring and other items, earnings would have been 37 cents a share, beating analysts' estimate for a profit of 34 cents a share.

General Mills Inc, ((GIS)), ice cream and Pillsbury products company, reported that Q3 earnings advanced nearly 7% to 68 cents a share, from 58 cents a share in the year-earlier period on 3% net sales growth, beating analysts’ expectations for a profit of 65 cents. The company added that profit growth was limited by higher input costs, higher employee benefits expense and increased advertising investment.

Apollo Group Inc, ((APOL)), education services company, reported Q2 earnings of 46 cents a share, down from a profit of 47 cents a share a year-earlier despite 12.6% revenue growth, due to expenses paid to its former CEO under a separation agreement lowered earnings in Q2 by 9 cents a share. The company was in line with analyst estimate for a profit of 46 cents a share.

Family Dollar Stores Inc, ((FDO)), discount retailer, reported Q2 net income of 35 cents a share, 48 cents a share in the same period last year. Q2 results include a litigation charge of 18 cents a share, connected with an adverse litigation judgment. Sales for Q2 were up 9.4% to about $1.74 billion and same-store sales advanced 3.2.

Scholastic Corp, ((SCHL)), children's books publisher, reported that its Q3 net loss widened to $15.5 million, or 37 cents a share, down from $800,000 despite 1%revenue growth, missing analysts forecasts for a loss of 7 cents a share. The company added that staffing and promotional expenses had advanced as revenue from its educational publishing unit fell.

[R]8:00 AM European averages made insignificant moves at mid-day.[/R]
European markets traded in a tight range at mid-day. Energy stocks like BP and Total were dragged down by five-week low oil prices to offset gains made on the back of higher Wall Street close and strong mining sector. The German DAX 30 inched up 0.1%, the French CAC 40 lost 0.2%, and London FTSE 100 was down 0.2%. The euro fell 0.2% to 41.2057.


[R]7:45AM Asian markets broadly advanced on U.S. markets gains.[/R]
Asian-Pacific benchmarks closed broadly higher, supported by U.S. markets gains and improved confidence in the global economic growth. However, the Nikkei edged down 0.04%, reversing from early gains as investors locked in profit taking, selling steel, property and brokerage stocks, such as Tokyo Steel MFG and JFE Holding. Across the region, Hong Kong’s Hang Seng rose 0.8%, despite the negative impact of interest rate concerns ahead of FOMC meeting. South Korea’s Kospi gained 0.2%, lifted by Kookmin Bank. Australia’s All Ordinaries climbed 0.4% on mining and energy stocks.