Mortgage Applications, Refi Activities Fall

Arthi Gupta
22 Sep, 2010
New York City

U.S. stocks edged lower after mortgage applications fell despite low rates and refinancing declined. Fed appears to be running out of options to stimulate the economy. Japan based Sharp Corp agreed to acquire Recurrent Energy for $305 million. The FDA approved Novatris drug for multiple sclerosis.

[R]9:35 AM New York – U.S. stocks edged lower after mortgage applications fell despite low rates and refinancing declined. Fed appears to be running out of options to stimulate the economy. Japan based Sharp Corp agreed to acquire Recurrent Energy for $305 million. The FDA approved Novatris drug for multiple sclerosis.[/R]

Asian markets struggled to hang on to gains of recent days and European markets declined on the worries that the U.S. Fed may have run out of options to stimulate the economy.

The Fed said it would maintain the target range for the federal funds rate at 0.0% to 0.25% and reiterated that economic conditions warrant exceptionally low rates for ""an extended period.""

Additionally, the Fed said it would continue to monitor the economic outlook and financial developments and is ""prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate"" but failed to give any specifics.

The FOMC said the pace of economic recovery is likely to be modest in the near term, and noted inflation will remain subdued for ""some time"" before rising to levels appropriate for a growing economy.

Mortgage applications in the United States continued to fall last week, as demand for new home loans slumped despite historically low interest rates, according to industry data released today. The Market Composite Index decreased 1.4% on a seasonally adjusted basis from one week earlier.

Refinancing activity also declined, the Mortgage Bankers Association said today in its Weekly Mortgage Applications Survey for the week ending September 17. The Refinance Index declined 0.9% from the previous week, the third weekly decline in a row. The seasonally adjusted Purchase Index decreased 3.3% from one week earlier.

Recurrent Energy and Sharp Corporation reached an agreement for Sharp to acquire Recurrent Energy, a leading solar project developer and generating company with a 2 GW pipeline. The acquisition is expected to close before the end of 2010, subject to customary closing conditions and regulatory approvals.

Under the terms of the agreement, Sharp will pay up to $305 million in cash at closing, subject to balance sheet adjustments, to purchase a 100% stake from Recurrent Energy shareholders. Recurrent Energy is a Hudson Clean Energy Partners portfolio company. Other shareholders include Mohr Davidow Ventures.

Novartis AG, the Swiss drugmaker announced that its oral multiple sclerosis treatment Gilenya 0.5 mg daily, a first-line treatment for relapsing forms of multiple sclerosis, has been approved by the FDA.

According to Novartis, Gilenya showed superior efficacy by reducing relapses by 52% at one year compared with interferon beta-1a IM, a commonly prescribed treatment for MS (multiple sclerosis).

Abbott Laboratories reportedly plans to cut around 3,000 of its workforce soon after completing the purchase of the pharmaceutical business of Belgium-based Solvay SA. The job cuts are expected to cost Abbott between $810 and $970 million and around $310 million in integrating two companies.

Earnings Review

Adobe Systems Incorporated ((ADBE)), the software developer said third quarter revenue rose 42% to $990.32 million from $697.51 million in the same quarter last year. Net income in the quarter surged 69% to $230.1 million or 44 cents per diluted share, compared to net income of $136.0 million or 26 cents per share for the year-ago quarter.

CarMax Inc. ((KMX)) reported second quarter net sales and operating revenues increased 13% to $2.34 billion from $2.08 billion in the second quarter of last year. Comparable store used unit sales increased 4%. Net income in the quarter rose 4.8% to $107.9 million or 48 cents per diluted share, compared with net income of $103.0 million or 46 cents per share in the second quarter of fiscal 2010.

Cintas Corporation ((CTAS)), the uniforms and business service provider reported first quarter revenue increased 3.6% to $924 million from $891.6 million in the same quarter last year. Net income in the quarter advanced 13% to $61 million or 40 cents per diluted share compared with net income of $54 million or 35 cents per share in the prior-year quarter.

Darden Restaurants, Inc. ((DRI)), the casual dining chain reported first quarter revenues increased 4.2% to $1.81 billion from $1.73 million in the prior-year quarter. Net income in the quarter increased 20% to $113.1 million or 80 cents per diluted share, compared to net income of $94.3 million or 67 cents per share in the year-ago quarter.

DaVita Inc. ((DVA)), the provider of dialysis services estimates third quarter earnings to be in the range of $1.11 to $1.14 per share, and operating income to be in the range of $254 million to $260 million.

General Mills, Inc. ((GIS)), the foods maker stated first quarter net sales increased 1.4% to $3.53 billion, from $3.48 billion in the prior-year quarter. Net earnings in the quarter rose 12.2% to $472.1 million or 70 cents per diluted share, compared with net earnings of $420.6 million or 62 cents per share in the same quarter last year.

Microsoft Corporation ((MSFT)) approved a 23% increase in quarterly dividend and also authorized up to $6 billion in incremental commercial paper and longer-term debt.

Progress Software Corporation ((PRGS)), the supplier of application infrastructure software and services said third quarter revenue gained 8% to $128.7 million, from $119.4 million in the third quarter of fiscal year 2009. Net income in the quarter rose 67% to $9.2 million or 21 cents per diluted share compared with net income of $5.5 million or 13 cents per share in the same quarter a year ago.

Skyworks Solutions, Inc. ((SWKS)), the chip maker raised its financial outlook for the fourth quarter of fiscal 2010, citing broad-based improvements in order demand. The company anticipates revenue for the fourth quarter of $310 million, up from the previous guidance of $300 million and non-GAAP earnings per share of $0.40 compared to the prior forecast of $0.37.