U.S. Housing Starts Surge 14.6%; Bank of America Swings to Loss

Arthi Gupta
19 Jul, 2011
New York City

U.S. indexes gained after strong earnings and housing starts rose 14.6% in June. Cisco agreed to sell Mexican set-top box factory to Foxconn and planned job cuts. IBM net rose 8%. Bank of America swung to a net loss on impairment charges.

[R]9:30 AM New York – U.S. indexes gained after strong earnings and housing starts rose 14.6% in June. Cisco agreed to sell Mexican set-top box factory to Foxconn and planned job cuts. IBM net rose 8%. Bank of America swung to a net loss on impairment charges.[/R]

U.S. stocks opened higher after a sharp increase in housing starts and better than expected earnings from IBM. Bank of American swung to a quarterly loss on higher than expected loan losses charges.

Asian markets extended losses on debt worries in the United States and Europe. Fitch warned that it will place the U.S. sovereign rating on Rating Watch Negative if the debt limit is not raised by the August 2 deadline.

European indexes gained on strong earnings. However, German economic sentiment slumped for the fifth consecutive month in July.

News Corp. is considering Chase Carey, deputy chairman, president and COO to succeed Rupert Murdoch for the top post of CEO, according to a Bloomberg report on Monday.

The decision to promote Carey is expected to be taken after Murdoch''s testimony before the British parliament in less than one hour.

The anticipated move follows the growing concern among the News Corp''s board members and executives about Murdoch''s ability to stem the fallout from the phone-hacking scandal in the UK.

U.S. Housing Starts Rise

Housing starts in the U.S. rose by 14.6% in June to a seasonally adjusted annual rate of 629,000 compared to the downwardly revised 549,000 in May, according to data released by the U.S. Commerce Department today. The June starts are 16.7% above the rate of 539,000 a year ago month.

New building permits also increased 2.5% in June to 624,000 from the revised May numbers of 609,000. However, the May permits were revised down slightly from the 612,000 rate initially reported.

Housing completion rose 1.7% from May and plunged 39.3% from a year-ago month to 535,000.

U.S. Homebuilder Confidence Recovers

The National Association of Home Builders said the Housing Market Index for the U.S. rose two points to a reading of 15 in July after falling three points to a reading of 13 in June.

Cisco Slashes Jobs

Cisco Systems plans to reduce its global workforce by approximately 6,500 employees including 2,100 employees who elected to participate in a voluntary early retirement program. This also includes a reduction of executive-level staff of vice president and above by nearly 15%, as part of the company''s $1 billion annual operating expense reduction. The reduction is approximately 9% of Cisco''s regular full-time workforce.

Separately, the company agreed to sell its set-top box manufacturing facility in Juarez, Mexico to Foxconn Technology Group, the electronics outsourcing firm based in Taiwan.

AIG Plans Leasing Unit IPO

American International Group, Inc. is looking to sell part of its airplane-leasing business through an initial public offering, the Wall Street Journal reported, citing people familiar with the matter.

AIG expects to sell about 25% of Los Angeles-based International Lease Finance Corp. through an IPO, the newspaper said.

The company estimates the IPO could raise $1.5 billion to $2 billion and proceeds from a sale or IPO of ILFC will be used to repay the U.S. government.

The U.S. Department of the Treasury currently holds 77% stake in AIG, following the company''s 2008 bailout.

Earnings Review

Bank of America Corporation ((BAC)) reported second quarter total revenue, net of interest expense, declined 55% to $13.24 billion versus $29.15 billion in the comparable period. Net loss in the quarter was $8.8 billion or 90 cents per diluted share compared with net income of $3.1 billion or 27 cents per diluted share in the year-ago period.

International Business Machines Corp. ((IBM)), the multinational technology and consulting firm said second quarter profit total revenues rose 12.4% to $26.67 billion from $23.72 billion in the prior year quarter. Net income in the quarter increased 8% to $3.66 billion or $3 per diluted share compared to net income of $3.39 billion or $2.65 per diluted share in the same quarter last year.

The Coca-Cola Company ((KO)), the non-alcoholic beverage company stated second quarter net operating revenues rose 47% to $12.74 billion compared with $8.67 billion in the previous year. Net income in the quarter increased 18% to $2.80 billion or $1.20 per diluted share compared to net income of $2.37 billion or $1.02 per diluted share in the year earlier period.

The Mosaic Company ((MOS)), the phosphate and potash crop-nutrient producer reported fourth quarter revenues surged 54% to $2.860 billion from $1.860 billion in the year-ago quarter. Net profit in the quarter soared 64% to $649.2 million or $1.45 per diluted share compared to net profit of $396.1 million or 89 cents per diluted share in the year-ago period.

Wynn Resorts Limited ((WYNN)), the casino operator said second quarter net revenues increased 33% to $1.37 billion from $1.03 billion in the second quarter of 2010. Net income in the quarter soared 133% to $122 million or 97 cents per diluted share compared to net income of $52.4 million or 42 cents per diluted share in the prior-year quarter.