U.S. Housing Starts Fall 5%; IATA Lifts Industry Outlook

Arthi Gupta
20 Sep, 2011
New York City

U.S. indexes gained ahead of the FOMC meeting today. Housing starts fell more than estimated in August. IATA raised 2011 outlook. U.S. court overthrew Chevron injunction against Ecuador court verdict. GE announced new customer agreements worth more than $3 billion.

[R]11:05 AM New York – U.S. indexes gained ahead of the FOMC meeting today. Housing starts fell more than estimated in August. IATA raised 2011 outlook. U.S. court overthrew Chevron injunction against Ecuador court verdict. GE announced new customer agreements worth more than $3 billion.[/R]

U.S. indexes traded higher ahead of the Federal Open Market Committee meeting today. Traders are optimistic that the Fed Chairman Ben Bernanke is expected to announce further stimulus measures to boost the U.S. economy.

European stocks pared losses on optimism that Greece may reach an agreement with the international lenders for the next bailout tranche.

In early trading, European indexes slumped after ratings agency downgraded Italy''s sovereign credit rating by one notch to A from A+, five levels above junk, citing the nation''s weakening prospects for economic growth and a “fragile governing coalition.”

The rating agency also said the outlook is ""negative.""

The rating agency also questioned if the recently passed measures of €60 billion will actually materialize. The Italian bonds edged higher and the yield on the 10-year benchmark bond hovered near 5.63%.

Italian government reacted angrily to the downgrade. Prime Minister Silvio Berlusconi’s office in a statement noted that his government has a solid majority in Parliament and is taking steps to increase revenues and cut expenses.

Italy has covered more than 75% of its funding for the year and needs to raise additional €100 billion by the end of the year.

Greek Finance minister Evangelos Venizelos said that the conference call with officials from the European Commission, the International Monetary Fund and the European Central Bank was “satisfying.”

The talks focused on the steps the government has to take before the troika approves the sixth tranche of Greece’s bailout. Greece said that the conference call would resume on Tuesday.

Prime Minister George Papandreou is considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the euro-zone or by exiting the single currency, according to sources cited by Kathimerini.

The Federal Open Market Committee is scheduled to commence a 2-day meeting today.

U.S. Housing Starts Decline

New U.S. residential construction fell more than expected in August, according to data released by the U.S. Commerce Department today,

The report showed that housing starts declined 5% in August at a seasonally adjusted annual rate of 571,000, from the revised numbers of 601,000 new housing starts in July.

New building permits on a seasonally adjusted annual basis rose 3.2% to 620,000 in August compared to the revised July data. July housing permits were revised up to 601,000 from the initially reported 597,000.

U.S. Homebuilder Confidence Down

Homebuilder confidence in the U.S. showed an unexpected deterioration in September, according to a report released by National Association of Home Builders on Monday.

The report showed that the NAHB/Wells Fargo Housing Market Index dropped to 14 in September from 15 in August.

IATA Lifts 2011 Outlook

The International Air Transport Association lifted its airline industry profit forecast for fiscal 2011 and 2012.

IATA currently expects industry profit for fiscal year 2011 to be $6.9 billion compared to the previous projection of $4 billion.

For 2012, industry profit is expected to fall to $4.9 billion on revenues of $632 billion for a net margin of only 0.8%.

Blackstone and Prestige Bid for GSK''s OTC Business

Blackstone Group and Prestige Brands Holdings, Inc. have teamed up to jointly bid for healthcare major GlaxoSmithKline plc''s over-the-counter consumer drug business valued in a range of $2.3 billion to $3.1 billion, according to reports on Monday.

U.S. Court Overthrows Chevron Injunction

Chevron Corp. suffered a major setback after a federal appeals court threw out a New York judge''s ruling that prevented the enforcement of an $18 billion judgment against the company by an Ecuadorean court.

An Ecuadorean court in Lago Agrio granted an $18.2 billion judgment in February against Chevron in a long-running environmental lawsuit involving the company''s subsidiary Texaco Petroleum Co. that it acquired in 2001. Chevron faced allegations that it is responsible for environmental and social harms in the Amazon region of Ecuador.

GE Announces New Customer Agreements

General Electric Co., the diversified conglomerate announced more than $3 billion in new customer agreements spanning its Energy business

The orders include natural gas production technologies, in addition to wind turbines, water treatment, grid infrastructure and equipment optimization technologies in the Middle East, Australia, Europe, Asia and North and South America.

Jazz Pharmaceuticals to Merge with Azur Pharma

Jazz Pharmaceuticals, Inc. agreed to combine with privately-held Azur Pharma Limited in an all-stock transaction. The combined company would be named Jazz Pharmaceuticals plc, incorporated in Ireland, with expected annual revenues of more than $475 million.

The combined company is expected to have a diversified revenue base from 12 products.

Earnings Review

AutoZone, Inc. ((AZO)), the automotive parts retailer reported fourth quarter net sales improved 8.1% to $2.64 billion from $2.45 billion in the same quarter last year. Domestic same store sales increased 4.5% for the quarter compared to a 6.7% growth last year.

Net income in the quarter rose 12.1% to $301.47 million or $7.18 per diluted share compared to net income of $268.93 million or $5.66 per share in the prior-year quarter.

American Water Works Co., Inc. ((AWK)), the water and wastewater utility company estimates fiscal year 2011 adjusted earnings in a range of $1.75 and $1.82 per share, higher than the previous guidance for adjusted earnings in a range of $1.65 and $1.75 per share.

ConAgra Foods, Inc. ((CAG)), the packaged foods company said first quarter net sales increased 9.5% to $3.07 billion from $2.80 billion in the previous year. Net income in the quarter slumped 42% to $85.3 million or 20 cents per diluted share compared to net income of $146.4 million or 33 cents per share last year.

FactSet Research Systems Inc. ((FDS)), the financial data provider stated fourth quarter revenue increased 14.1% to $191.94 million from $168.23 million in the same quarter last year. Net income in the quarter climbed 4% to $40.88 million or 88 cents per diluted share compared to net income of $39.29 million or 83 cents per share in the prior-year quarter.

Kirby Corporation ((KEX)), the operator of inland tank barges and towing vessels estimates third quarter net earnings to exceed $0.90 per share compared with its July outlook of $0.82 to $0.87 per share.