U.S. Stocks Up; Housing Starts Soar

Arthi Gupta
21 Sep, 2010
New York City

U.S. stocks gained after housing starts surged more than expected 10.5% in August. McMoRan agreed to buy Plains Exploration''s shallow water Gulf of Mexico assets for $818 million. Clorox is negotiating to sell its auto-care brands to Avista Capital for $800 million.

[R]9:35 AM New York – U.S. stocks gained after housing starts surged more than expected 10.5% in August. McMoRan agreed to buy Plains Exploration''s shallow water Gulf of Mexico assets for $818 million. Clorox is negotiating to sell its auto-care brands to Avista Capital for $800 million.[/R]

Asian and European markets advanced.

Housing starts increase was ahead of the expectations in August, according to a report released by the U.S. Commerce Department today. Starts surged 10.5% to an annual rate of 598,000 in August from the revised July estimate of 541,000.

Building permits increased 1.8% to an annual rate of 569,000 in August from the July rate of 559,000.

A one-day FOMC Meeting of the Federal Reserve is scheduled today.

Homebuilder confidence saw continued weakness in the month of September, according to a report released by the National Association of Home Builders on Monday, with homebuilders expressing continued uncertainty following the expiration of the homebuyer tax credit.

The report showed that the NAHB/Wells Fargo Housing Market Index was at 13 in September, unchanged from the reading seen in August.

In another report, the National Bureau of Economic Research declared on Monday that the longest recession that started in December 2007 ended in June 2009. The latest end-date suggested the longest recession since the Great Depression that lasted 43-months and ended in 1932. The other two long recessions were each 10-month long during 1973-75 and 1981-1982.

However, the NBER noted that while the committee determined that a trough occurred in June of 2009, it did not conclude that economic conditions have been favorable since that month or that the economy had been operating at normal capacity.

BHP Billiton Group, the world''s largest miner comprising of BHP Billiton Ltd. and BHP Billiton Plc. extended its all-cash tender offer to acquire all of the issued and outstanding common shares of Canadian fertilizer maker Potash Corp. of Saskatchewan, Inc.

The last date for the unsolicited offer, considered as the biggest takeover so far this year, has been extended by 30 days to midnight of November 18 from midnight of October 19.

McMoRan Exploration Co., the oil and gas firm agreed to buy shallow water Gulf of Mexico shelf assets from Plains Exploration & Production Co. for a combination of stock and cash, totaling $818 million. The deal is effective August 1, and is expected to close by year-end 2010.

Under the terms of the deal with Plains, McMoRan will issue 51 million shares of its common stock and $75 million in cash to buy all of Plains'' interests and exploration rights in the shallow waters of the shelf of the Gulf of Mexico.

The Clorox Company, the consumer products maker is nearing a deal to sell its auto-care brands Armor All and STP, which are under its cleaning products division, to private-equity firm Avista Capital Partners for nearly $800 million. The sale of the brands is expected to be announced as early as later this week, the reports said.

Hewlett-Packard Company settled a lawsuit filed against its former Chief Executive Officer Mark Hurd for breach of contract and threatened misappropriation of trade secrets following Hurd''s decision to join business software maker Oracle Corp. as Co-President.

While the terms of the settlement are confidential, Mr. Hurd will adhere to his obligations to protect HP’s confidential information while fulfilling his responsibilities at Oracle. Hurd agreed to waive his rights to about 346,000 restricted stock units that he was entitled to keep as part of his separation agreement with HP.

Apple Inc. said it will start selling its fourth generation smart phone device iPhone 4 in China through its retail stores, beginning September 25. With this release, China will join Apple’s smart phone user nations, following the U.S., the UK, France, Germany and Japan.

Earnings Review

AutoZone, Inc. ((AZO)), the retailer and distributor of automotive replacement parts and accessories said fourth quarter net sales rose 9.5%to $2.44 billion, from $2.23 billion in the fourth quarter of fiscal 2009. Domestic same store sales increased 6.7% for the quarter. Net income in the quarter improved 14% to $268.93 million or $5.66 per share compared with net income of $236.13 million or $4.43 per share last year, reflecting higher sales.

ConAgra Foods, Inc. ((CAG)), the packaged foods company reported first quarter net sales fell 2.4% to $2.82 billion, compared to $2.89 billion in the prior-year quarter. Net income in the quarter declined 11.8% to $146.4 million or 33 cents per diluted share, compared with net income of $165.9 million or 37 cents per share in the same quarter last year.

Cooper Industries plc((CBE)), the electrical products maker raised its financial outlook for the third quarter and estimates earnings per share in a range of $0.82 to $0.85.

Ennis, Inc. ((EBF)), the business products and apparels maker reported second quarter revenues increased 3.8% to $143.03 million from $137.77 million last year. Net earnings in the quarter rose 27% to $12.13 million or 47 cents per diluted share compared to net earnings of $9.55 million or 37 cents per share in the previous year.

Exar Corporation ((EXAR)), a fabless semiconductor company announced a revision to its fiscal 2011 second quarter guidance. The company now expects revenue for the second quarter to be between $36.0 million and $36.5 million, compared to prior estimate of $40 million to $42 million.

FactSet Research Systems Inc. ((FDS)) Tuesday reported fourth quarter revenues grew 8% to $168.23 million from $155.46 million a year earlier. Net income in the quarter rose 8.3% to $39.29 million or 83 cents per diluted share compared with net income of $36.28 million or 74 cents per share in the previous year.

TeleNav, Inc. ((TNAV)), the provider of wireless location-based services amended its agreement with Sprint and Tele Atlas and offered guidance for full fiscal year ending June 30, 2011.

For the first quarter, TeleNav continues to expect GAAP net income of $10 million or $0.22 per share and for fiscal year 2011, the company anticipates GAAP net income of $23 million to $25 million, or $0.50 to $0.55 per share.