U.S. Refinance Activity Drops 6.5%; GM, Toyota Lead Auto Sales

Arthi Gupta
02 Mar, 2011
New York City

U.S. indexes traded sideways as unrest in Middle East escalates. U.S. mortgage applications dropped 6.5%. NetJets ordered 120 Bombardier aircrafts in a deal valued over $6.7 billion. PPL agreed to acquire E.ON''s UK distribution business for $6.4 billion. Costco quarterly sales and earnings rose.

[R]8:40 AM New York – U.S. indexes traded sideways as unrest in Middle East escalates. U.S. mortgage applications dropped 6.5%. NetJets ordered 120 Bombardier aircrafts in a deal valued over $6.7 billion. PPL agreed to acquire E.ON''s UK distribution business for $6.4 billion. Costco quarterly sales and earnings rose.[/R]

Markets in Asia declined as crude oil price surge dragged indexes lower in Hong Kong, Japan and other smaller markets. Food prices and broader inflation is on the rise in Asia and higher oil prices are expected to accelerate the inflation in the region.

Australia reported 0.7% in the fourth quarter GDP and Japan passed $1.1 trillion budget after a protracted negotiations among lawmakers.

However, the fears of growing unrest in Iran spooked investors in the Middle East. Saudi Arabia benchmark stock index plunged 6.8% on Tuesday and unrest continued in Libya and spreads to Oman and people clash with securities forces in Tehran and other cities in Iran.

U.S. Defense Secretary Robert Gates confirmed that two ships and 400 Marines are dispatched to the Mediterranean Sea near Libya to conduct “humanitarian relief” and “evacuations.”

U.S. Mortgage Applications Drop

U.S. mortgage applications declined last week.

The Mortgage Bankers Association''s key measure of mortgage loan application volume decreased 6.5% on a seasonally adjusted basis from one week earlier. Applications had risen 13.2% the week before.

The MBA''s Refinance Index decreased 6.5% from the previous week. The seasonally adjusted Purchase Index decreased 6.1% from one week earlier.

NetJets Orders 120 Bombardier Aircraft

Bombardier Aerospace received orders for up to 120 aircraft from private aviation company NetJets Inc., a Berkshire Hathaway Inc. company. The company received firm order for 50 Global business jets with options for an additional 70 Global aircraft.

If all options are exercised, the total value of the order will be over $6.7 billion, based on list prices.

According to Bombardier Aerospace, this is the largest business aircraft sale in the company''s history.

PPL Acquires E.ON''s UK Distribution Business

PPL Corp., the utility company agreed to acquire German utility giant E.ON AG''s UK power distribution network for £4 billion or $6.4 billion.

The company announced that it reached a deal to buy Central Networks electric distribution business in central England from E.ON UK plc for £3.5 billion or $5.6 billion in cash, and assume £500 million or $800 million in debt.

The Central Networks business is the second-largest electricity distribution network operator in the UK.

MetLife Permits AIG Sale of Equity Securities

American International Group, Inc. announced that MetLife, Inc. agreed to allow AIG to offer for sale the MetLife equity securities AIG received when it sold American Life Insurance Company to MetLife earlier than contemplated under the original terms of the sale.

AIG will use the net proceeds from the sale to accelerate payments to the U.S. Department of the Treasury.

U.S. Auto Sales Rise

Automakers reported strong U.S. vehicle sales for the month of February, benefiting from growing consumer confidence and an economic recovery. General Motors Co. led the surge with a 45.8% growth followed by Toyota Motor Corp.''s 41.8% gain, while Ford Motor Co. and Chrysler Group LLC also reported double-digit increases.

GM, the largest U.S. automaker, said its February U.S. vehicle sales surged 45.8% to 207,028 units from 141,951 units in the same month last year.

Ford Motor Co. said that it sold 156,626 vehicles in February, an increase of 13.8% from 137,644 vehicles sold in the same month last year.

Chrysler Group LLC said vehicle sales increased 13% to 95,102 units from 84,449 units in the same month last year.

Toyota Motor Sales U.S.A. Inc., a unit of Japan''s Toyota Motor, said its U.S. vehicle sales for February increased 41.8% to 141,846 units from 100,027 units in the same month last year.

Global Factory PMI Improves

Factories around the world improved in February even as input prices rose to their highest level in two-and-a-half years, a fresh survey suggested on Tuesday.

The JP Morgan/Markit global manufacturing purchasing managers'' index rose to a near seven-year high of 57.8 in February from 57.1 in January.

India-based Tata Steel Raises Stake in Riversdale

Riversdale Mining Ltd., the Australian coking coal miner said that Indian steel giant Tata Steel raised its stake in the company to 27.14%.

According to a statement by Riversdale, Tata owns 64.23 million Riversdale shares as of March 1. Previously, the steel giant''s holding was 57.15 million shares, with a voting power of 24.2%. Tata increased its holding through market purchase by its indirect subsidiary Tata Steel global Minerals Holdings Pte Ltd.

Earnings Review

Costco Wholesale Corporation ((COST)), the membership warehouses operator said second quarter net sales increased 11% to $20.45 billion from $18.36 billion in the comparable period a year ago. Net income in the quarter increased 16.4% to $348 million or 79 cents per diluted share compared to net income of $299 million or 67 cents per share last year.

Hovnanian Enterprises, Inc. ((HOV)), the homebuilding and financial services company reported first quarter total revenues fell 21% to $252.6 million from $319.6 million in the year-ago quarter. Net loss in the quarter was $64.1 million or 82 cents per diluted share compared to net income of $236.2 million or $2.97 per share last year.

Joy Global Inc. ((JOYG)), the mining equipment manufacturer said first quarter net sales increased 12% to $869.53 million from $729.22 million reported last year. Net income in the quarter increased 34.1% to $102.23 million or 96 cents per diluted share compared to net income of $76.22 million or 73 cents per share in the previous year.

Nektar Therapeutics ((NKTR)), the clinical-stage biopharmaceutical company said fourth quarter revenues rose 16.2% to $45.3 million from $39.0 million a year before. Net loss in the quarter widened 194% to $22.6 million or 24 cents per diluted share compared to a net loss of $7.7 million or 8 cents per share a year before.

Shanda Interactive Entertainment Ltd. ((SNDA)), the entertainment media company reported fourth quarter consolidated net revenues grew 2% to RMB1.54 billion from RMB1.51 billion in the same quarter last year. Net income in the quarter plunged 65% to RMB128.0 million compared to net income of RMB369.3 million in the year-ago quarter. Earnings per American Depositary Share declined to RMB2.22 or $0.34 from RMB5.30 in the prior-year quarter.

Staples, Inc. ((SPLS)), the office products company said fourth quarter sales edged up 0.2% to $6.42 billion compared to $6.41 billion in the previous year. Net income in the quarter grew 17.5% to $274.74 million or 38 cents per diluted share compared to net income of $233.91 million or 32 cents per share recorded a year ago.

The St. Joe Company ((JOE)), the real estate development company reported fourth quarter total revenues were $37.1million, same as previous year. Net loss in the quarter narrowed 95.4% to $2.7 million or 3 cents per diluted share compared to a net loss of $58.7 million, or 64 cents per share, for the fourth quarter of 2009,

The Middleby Corporation ((MIDD)), the food processing equipment maker said fourth quarter net sales rose 36% to $207.23 million from $152.49 million in the previous year. Net earnings in the quarter increased 17.5% to $20.99 million or $1.13 per diluted share compared to net income of $17.87 million or 95 cents per share a year ago.

TiVo Inc. ((TIVO)), the television services provider reported fourth quarter total revenues fell 19% to $55.8 million from $68.6 million last year. Net loss in the quarter widened 244% to $34.4 million or 30 cents per diluted share compared to a net loss of $10.0 million or 9 cents per share a year earlier.

VeriFone Systems, Inc. ((PAY)), the electronic payment solutions company said first quarter net revenues increased 27% to $284 million from $223 million in the same quarter last year. Net income in the quarter soared 202% to $32.0 million or 35 cents per diluted share compared to net income of $10.6 million or 12 cents per share in the prior-year quarter.