New Homes Sales Drop

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

Market averages traded in erratic fashion on economic news. New homes sales dropped the most in nine years but durable goods orders rose more than expected. Broader averaged lost of most the gains by learly afternoon and failed to recover for the rest of the session. Lucent is in talks to be acquired by Alcatel and investors sell 90% of the offered shars in the IPO of Tim Hortons on 38% gain at the opening.

[R]4:15PM New home sales dropped 10.5% in February, largest drop in nine years. [/R]
-February new home sales dropped 10.5%.
-Durable goods orders rose 2.6% in February.
-Crude oil closed up 35cents to $64.26 per barrel.
-Gold closed up $9.70 per ounce to $560.50 and silver up 4.5 cents to $10.73.
-Yield on 10-year bond rose to 4.665% and 30-year bond to 4.686%.
-Tim Hortons IPO jumps up 30% from the offer price of $23.95 per share.

[R]Erratic and volatile trading for the day and for the week.[/R]
Market averages closed higher for the day and for the week but trading was erratic and volatile. The existing home sales dropped the most in nine years however durable goods orders rose more than estimated for the month of February. Market averages lost most of the day’s gain at mid-day and failed to recover for the rest of the trading hours. Lucent jumped 8% on the news that the company is in talks to merge with Alcatel and Google jumped up 7% on the news that the company will be added to the S&P 500 index by the end of this month. Emerging markets in Brazil, Mexico and Argentina closed up 0.28%, 0.43% and 0.06%. Emerging markets in Asia were led by rise of 1.01% in India and Philippines closed at record high of 2,208 up 0.70% Tim Hortons IPO opened up 38% from the offer price however closed up 17% only. Close to 95% of the offered shares changed hands.

[R]2:30PM Tim Hortons IPO jumps 38% at the opening.[/R]
Wendy’s International spun-off Canadian retail chain of coffee and doughnut shops and priced shares at $24 per share. The shares jumped 38% to $31.95 at the opening from the IPO price of $23.95 per share. Wendy’s unit sold 29 million shares at the high end of the offer price range $22 and $24 per share led by a team of underwriters Goldman Sachs and RBC Capital Markets. The 42-year old company was acquired by Wendy’s at $300 million and only 15% of the company was sold in the IPO. With the current valuation the company is valued close to $7 billion.

Wendy’s has said that it plans to sell rest of its holding in Hortons to current shareholders. Two other restaurant company’s IPO have found investors favor this year. Chipotle Mexican Grill ((CMG)) which has double since the offering and Morton’s Restaurant Group ((MRT)) jumped 5% at the opening. The company plans to have between 3,500 and 4,000 restaurants from its current base of 2,600 and grow to 500 locations from 288 in the U.S. in the year 2008. Same store sales at hortons’s has been averaged between 5% and 7% in the last

[R]12:30PM European markets closed higher on merger deals.[/R]
European markets closed higher Friday, lifted by merger-and-acquisition activity and U.S. gains on economic data. German drug maker Bayer rose 1.9%, announcing a plan to outbid its rival Merck with an offer of 16.3 billion euro to Schering. French telecom company Alcatel was also in the spotlight on talks with Lucent Technologies about a prospective merger deal. The German DAX 30 gained 0.4%, the French CAC 40 rose 0.5%, and London FTSE 100 climbed 0.7%.

Crude oil prices rose on supply concerns. Light sweet crude May delivery gained 34 cents to $64.25 a barrel. Gasoline was steady at $1.815, while heating oil fell slightly to $1.7830. Natural gas added 2 cents to $7.35 per 1,000 cubic feet. London Brent for May delivery climbed 29 cents to $63.56 a barrel. European gold advanced. In London gold traded at $558.60, up from $546.70. In Zurich the precious metal rose to $558.60 from $546.80. In Hong Kong gold gained 70 cents to $550. Silver advanced to $10.70, up from $10.50. The U.S. dollar declined against other major currencies. The euro traded at $1.2017, up from $1.1966. The dollar bought 117.65 yen, down from 117.91. The British pound was quoted at $1.7418, up from $1.7348.

[R]11:30AM Stock markets advanced on new home sales data.[/R]
Recovering from a lackluster trading in early morning, stocks turned positive on a report, showing a steeper-than-expected drop in new home sales which brought relief to investors, offsetting recent interest-rate concerns. The data contributed to a notable decline by treasury yields. The 10-year treasury yield fell 5.2 basis points at 4.687%. Commodities stocks contributed significantly to the market strength. Gold stocks posted a sharp rise with the precious metal price as high as $559 an ounce. The sector rose 2.9%. Soaring oil prices took energy stocks higher. Oil, oil service, and natural gas stocks posted notable gains. The Nasdaq outperformed the other major averages on strength in the technology sector with networking, internet, and semiconductor stocks helping to lead the sector higher. The gains by networking stocks came on news that Lucent ((LU)) is in talks with Alcatel ((ALA)) about a potential merger of equals. Shares of Lucent rose 8.5%, while Alcatel gained 1.2%. In other news, shares of Tim Hortons ((THI)) moved sharply higher on their first day of trading, currently up more than 30%. Among falling stocks, Cephalon ((CEPH)) posted a decline of 12.7% on lowered full-year sales forecast.

[R]10:30AM Stocks moved to the downside. The Nasdaq showed modest gain.[/R]
Reversing from some initial rise, stocks moved to the downside with the Dow and the S&P 500 falling into negative territory, while the Nasdaq managed to sustain a modest gain. The decline was contributed to weakness among housing stocks, ahead of the release of data on February new home sales. Renewed advance of oil prices sent transportation stocks lower, with the sector extending recent losses Meanwhile, continued strength among networking stocks kept the Nasdaq slightly above the flat line. The sector benefited from news of merger talks between Lucent ((LU)) and Alcatel ((ALA)). Google ((GOOG)) was another strong performer, with the Web search provider rising 6.5% on news that it is being added to the S&P 500.

[R] New home sales dropped by 10.5%. [/R]
The Department of Commerce released its report on new homes sales in the month of February on Friday, showing that sales fell even more than economists had expected. The data may raise some concerns about the strength of the housing market. The report showed that new home sales fell 10.5 percent to a seasonally adjusted annual rate of 1.080 million units in February from a revised 1.207 million unit rate in January. With the decrease, February new home sales were down 13.4 percent year-over-year. Economists expected a more modest decrease to a 1.200 million unit rate compared to the 1.233 million unit rate originally reported in January. The Commerce Dept. noted that the median sales price of new houses sold in February was $230,400, while the average sales price was $296,700. Additionally, the seasonally adjusted estimate of new houses for sale at the end of February was 548,000. This represents a supply of 6.3 months at the current sales rate.

[R] 9:45AM Stocks opened mixed ahead of new home sales data.[/R]
Stocks opened mixed with the Nasdaq moving on reflecting gains made by networking and internet stocks. However, the other indexes were flat on cautiousness before new home sales data. The Dow Jones was up 6.72 points, or 0.06%. The Standard & Poor's 500 Index was down 0.14 points, or 0.01%. The Nasdaq was up 5.48 points, or 0.24%. Lucent ((LU)) rose 10.6%, boosting the networking sector after it confirmed that it entered deal talks with Alcatel ((ALA)) about a potential merger of equals. The internet sector benefited from strong gains in Google (GOOG) shares on news that the company will be added to the S&P 500 on March 31. The company stock rose 8.3%.

[R]9:00AM Stock futures pointed to a positive start.[/R]
U.S. stock futures indicated a mixed to positive start, following a weak Thursday close as better-than-expected existing home sales raised further interest rate concerns, sending stocks down. On Friday morning sentiment was lifted by news that Google ((GOOG)) will be added to the benchmark S&P 500 index. However the Dow and S&P 500 futures posted some weakness on cautiousness ahead of economic data that could build on the growing fears of interest-rate hikes. However, the Nasdaq showed some strength as Google’s stock, listed on the index, rose 9.3%. The company's stock listing would be added to the S&P 500 Index on March 31. In other corporate news, Lucent Technologies ((LU)) gained after French peer Alcatel confirmed it was in merger talk with the company, following an unsuccessful attempt the two companies to merge in the spring of 2001with $23 billion involved.

Crude oil prices retreated, following a spike yesterday on weak U.S. oil supplies. Light sweet crude May delivery surged lost 6 cents to $63.85 a barrel. London Brent for May delivery fell 10 cents to $63.17 a barrel. Gold advanced, despite stronger U.S. dollar, gaining ground after losing streak Gold for April delivery gained $1.40 to $552.20. Silver gained 3 cents to $10.72. The U.S. dollar advanced on strong economic data. The euro traded at $1.1978, up from $1.1973. The dollar bought 118.20 yen, up from 117.85.
Rex Stores, ((RSC)), consumer electronics retailer, reported Q4 earnings of 57 cents a share, down from $1.30 a share in the same period a year earlier despite 7.5% revenue growth and 7.9% same-store sales growth. Last year's results incorporated an $8 million tax benefit.

AutoNation, ((AN)), automotive products and services company, announced it expects Q1 earnings from continuing operations of 32-35 cents a share. Last year in the same period the company reported net earnings of 33 cents a share. The AutoNation said higher floor plan interest expenses will have an impact on earnings by 2 cents a share and stock option expenses will amount to a penny a share. Analysts are expecting earnings of 37 cents a share.

[R]February durable goods orders rebounded by 2.6%.[/R]
The Commerce Dept. said that new orders for manufactured durable goods rose 2.6 percent in February following an 8.9 percent drop in January. Economists had expected a more modest increase of about 1.5 percent compared to the 9.9 percent decrease originally reported for January. The rebound in durable goods orders reflected a significant increase in orders for commercial aircraft, which rose by 52.5 percent in February following a steep 70.1 percent drop in January. At the same time, orders for defense aircraft continued to decline in February. Excluding orders for transportation equipment, orders for durable goods fell 1.3 percent in February after rising 1.6 percent in January. Meanwhile, durable goods orders excluding defense edged up 0.3 percent in February after falling 7.7 percent in January. The report also showed that shipments of durable goods orders rose 0.2 percent in February following a decrease of 1.8 percent in January. Inventories of durable goods fell 0.5 percent in February after rising 1.0 percent in January. While the rebound in orders may generate some optimism about the strength of the manufacturing sector, it may add to recent concerns about further interest rate hikes. The Federal Reserve is scheduled to make its next decision on rates after a two-day meeting ending next Tuesday. Most analysts expect the Fed to raise rates by another quarter point, marking the fifteenth consecutive rate hike. Nonetheless, there is some uncertainty about what the Fed will say about the outlook for rates in its accompanying statement.

[R]8:45PM Mumbai closes 1% up and 0.8% for the week.[/R]
Mumbai’s Sensex rose 1%, after a mild sell-off for three days, led by steady rise in metals and mining, construction and select banking stocks. The trading volume and value of stocks was lighter than the weekly average but index still managed to gain a new high of 10,950.30 on the rise of 109.71 points. Foreign investors led the buying activity for the week as reported in the latest data. With the international copper price trading at peak levels local metals companies enjoyed robust gains led by rise of 6% in Hindalco to Rs. 170 and Sterlite Industries to Rs. 1,555 and jump of 12% in SAIL to Rs. 82 on heavy volume.

State Bank affiliates enjoyed run for the second day on the news that State Banks of Mysore, Bikaner and Jaipur and Travancore received approval from Union cabinet to raise capital and issue new shares to shareholders. Pharmaceutical stock Cipla rose 4.6% to Rs. 634.65 on the news that the company has set stock bonus of 3:2 on April 25th and Ranbaxy rose 2% to Rs. 401 on the release of asthma treatment inhaler product.

[R] 8:00 AM European averages traded higher on deal talk.[/R]
European markets advanced at mid-day dealings, lifted by merger-and-acquisition activity which helped markets largely ignore the weak close on Wall Street yesterday. German drug makers and the French telecommunication company Alcatel were in the spotlight with Bayer offering 16.3 billion euro to Schering and Alcatel getting into talk with Lucent Technologies about a prospective merger deal. The German DAX 30 gained 0.2%, the French CAC 40 rose 0.4%, and London FTSE 100 climbed 0.6%.

[R]7:45AM Asian markets broadly advanced. The Nikkei rose on property stocks.[/R]
Asian-Pacific benchmarks finished broadly higher with the Nikkei rising 0.4% to 16.560.87, lead by gains in real-estate and railway issues. Property stocks advanced on economic data which showed that commercial land prices rose for the first time in 15 years, giving signal that the country is getting out of deflation. The biggest property developer Mitsui Fudosan gained 0.4%, while Sumitomo Realty & Development rose 2.6%. Across the region, South Korea’s Kospi recovered from early losses to climb 0.7%, Taiwan Weighted index gained 0.2%, supported by steel stocks and expectations of higher steel prices. Hong Kong’s Hang Seng fell 0.4%, despite solid earnings. Shanghai Composite dropped 0.6%, ending a four-session gaining streak.