U.S. Mortgage Applications Rise; Retail Sales, Producer Prices Flat

Arthi Gupta
14 Sep, 2011
New York City

U.S. indexes traded sideways after mortgage and refinancing activity improved but retail sales and producer prices remained flat in August. Oaktree offered to acquire Jakks Pacific for $670 million. ConAgra reaffirmed its $94 a share proposal to acquire Ralcorp. Cisco lowered sales outlook.

[R]9:10 AM New York – U.S. indexes traded sideways after mortgage and refinancing activity improved but retail sales and producer prices remained flat in August. Oaktree offered to acquire Jakks Pacific for $670 million. ConAgra reaffirmed its $94 a share proposal to acquire Ralcorp. Cisco lowered sales outlook.[/R]

U.S. indexes fluctuated after mortgage applications rose 6.3% for the first time in a month. However, retail sales and producer prices remained unchanged in August.

European indexes pared yesterday’s gain in early trading after ratings agency Moody''s downgraded two French banks, Societe Generale and Credit Agricole, citing their exposure to the Greek economy.

However, during the course of the day, stocks rose modestly after the European Commission president Jose Manuel Barroso said at the European Parliament plenary session that the Commission will soon present options for the introduction of euro bonds.

U.S. Treasury Secretary Timothy Geithner is scheduled to take part in a meeting of European Financial finance ministers in Poland. There is speculation that Geithner may urge for an increase in the size of the European Financial Stability Facility.

German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou are due to hold a video conference later today on concerns that Greece is on the periphery of a default.

Elsewhere in Italy, Prime Minister Silvio Berlusconi''s government won a confidence vote for its €54 billion austerity plan in Italy''s Lower House, clearing the way for a vote on the bill and passage later today.

Asian markets slumped after China’s Premier Wen Jiabao urged developed economies to develop responsible and effective monetary policies. ""Countries must first put their own houses in order,"" Jiabao said today.

U.S. Mortgage Applications Rise

U.S. mortgage applications rose 6.3% for the first time in a month for the week ending September 9, following a 4.9% decline the week before, according to industry data released by the Mortgage Bankers Association today.

Refinancing climbed 6% and purchase applications rose 7%, according to the MBA''s weekly survey.

Thirty-year fixed mortgage rate decreased to 4.17% from 4.23%.

U.S. Retail Sales, Producer Prices Flat

U.S. retail sales adjusted for seasonal variations but not price changes was at $389.5 billion in July, unchanged from the June, according to data released by the U.S. Commerce Department today.

U.S. Producer Prices Unchanged

The U.S. Labor Department reported that producer prices were unchanged in August following a 0.2% gain in July.

Core prices, excluding the volatile food and energy sectors, rose a modest 0.1% for August. The lowest reading since May and a notable slowdown compared to the gain of 0.4% in July.

Oaktree Bids for Jakks

Oaktree Capital Management, L.P., the investment management corporation offered to acquire toymaker Jakks Pacific Inc. for $20 per share in cash or a total of about $670 million.

The offer price represents a 25% premium over Jakks'' closing stock price of $16 per share on September 13.

ConAgra Reaffirms Proposal to Acquire Ralcorp

ConAgra Foods reiterated its $94 per share, all-cash proposal to acquire Ralcorp Holdings, Inc. On August 12, Ralcorp previously rejected the acquisition proposal of $94 a share. This was ConAgra''s third offer for Ralcorp.

The initial $82 per share stock-and-cash proposal was made on March 22, that was later increased to $86 per share in early May.

Earnings Review

Cisco Systems Inc. ((CSCO)), the networking equipment maker estimates sales to grow 5% to 7% annually for the next three years, lower than the 12% to 17% growth that had been previously forecast. Earnings are estimated to grow about 7% to 9% percent per year.

Philip Morris International Inc. ((PM)), the tobacco company increased the company''s regular quarterly dividend by 20.3%, to an annualized rate of $3.08 per common share.

Solutia Inc. ((SOA)), the manufacturer of performance materials and specialty chemicals lowered its adjusted earnings per share outlook for 2011 to a range of $1.95 to $2.05 from the range of $2.10 to $2.25 per share expected earlier.