U.S. Housing Starts Soar 15%; CPI Increases 0.3%

Arthi Gupta
19 Oct, 2011
New York City

The U.S. indexes slumped in early trading after mortgage activity declined on higher interest rates. U.S. housing starts soared 15% and consumer prices rose in September. Morgan Stanley swung to quarterly profit.

[R]10:30 AM New York – The U.S. indexes slumped in early trading after mortgage activity declined on higher interest rates. U.S. housing starts soared 15% and consumer prices rose in September. Morgan Stanley swung to quarterly profit.[/R]

U.S. indexes edged lower after mixed economic data and earnings.

Home starts soared 15% in September and home mortgage applications declined last week and consumer price index increased at a slower pace in September.

Stocks in Europe gained and market indexes advanced on the hopes that regional leaders are close to finalizing the details of European rescue fund and overlooked the third downgrade suffered by Spain.

The conflicting media reports suggested that European leaders are likely to increase the European Financial Stability Facility to as high as €2 trillion. European leaders are divided in how to leverage the rescue fund without approaching each member and enough capital to successfully complete the bank recapitalization plan.

Markets are highly sceptical that Europe can quickly leverage the rescue fund from 400 billion to 2 trillion when most of the euro zone members are against bailout of peripheral euro zone members.

U.S. Mortgage Activity Slumps

U.S. mortgage applications declined last week, as interest rates continued to rise according to industry data released today.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity dropped 14.9% in the week ended October 14, following a 1.3% gain the week before.

The MBA''s seasonally adjusted index of refinancing applications fell 16.6%, while loan requests for home purchases fell 8.8%.

Fixed 30-year mortgage rates averaged 4.33%, up from 4.25%.

U.S. Housing Starts Soar

U.S. housing starts in September rose 15% at a seasonally adjusted annual rate of 658,000, more than the revised August estimate of 572,000.

Single-family housing starts, the largest segment of the housing market, rose 1.7% to a level of 425,000. However, starts of buildings with five or more units surged 53.4% to a level of 227,000.

However, new building permits issued in September fell 5% to an annualized level of 594,000, from the revised rate of 625,000 in August.

U.S. Consumer Price Index Up 0.3%

The U.S. Labor Department said its consumer price index rose 0.3% in September following a 0.4% gain in August, on higher energy prices.

Excluding a 2% jump in energy prices as well as a moderate increase in food prices, the core consumer price index edged higher 0.1% in September after rising 0.2% in each of the two previous months.

However, most families and individuals are experiencing sharply higher food and energy prices and cost of education, transportation and healthcare are also on the rise.

Investors are increasingly factoring higher the Fed’s estimate of inflation.

Carlyle Buys Stake in Telecable

The Carlyle Group, the U.S.-based private equity firm agreed to buy 85% stake in Spanish cable-television company Telecable de Asturias S.A.U. in a deal valuing the company at €400 million or $549.4 million.

Earnings Review

Abbott Laboratories ((ABT)), the healthcare products maker said third quarter net sales rose 13.2% to $9.817 billion from $8.675 billion in the prior-year quarter.

Net earnings in the quarter plummeted 66% to $303 million or 19 cents per diluted share compared to net earnings of $891 million or 57 cents per share in the same quarter last year.

Abbott plans to separate into two publicly traded companies, focusing separately on diversified medical products and research-based pharmaceuticals.

Morgan Stanley ((MS)), the global financial services firm reported third quarter net revenues soared 46% to $9.89 billion from $6.78 billion in the same period last year.

Net income in the quarter was $2.15 billion or $1.15 per diluted share compared with a net loss of $91 million or 7 cents per share last year.

The Bank of New York Mellon Corporation ((BK)), the global financial services company reported third quarter total revenue rose 8% to $3.69 billion from $3.42 billion in the prior-year quarter.

Net income in the quarter increased 5% to $651 million or 53 cents per diluted share compared to net income of $622 million or 51 cents per share in the prior year.