Weak Home Sales Drag U.S. Indexes Lower

Devan Biswas
26 Jan, 2012
New York City

U.S. stocks declined after new home sales fell unexpectedly in December and dropped 6.2% to a record low in 2011. However, durable goods orders and weekly jobless claims rose. AT&T sold 9.4 million smartphones in the quarter and took $4 billion charge for a failed takeover bid.

[R]4:30 PM New York – U.S. stocks declined after new home sales fell unexpectedly in December and dropped 6.2% to a record low in 2011. However, durable goods orders and weekly jobless claims rose. AT&T sold 9.4 million smartphones in the quarter and took $4 billion charge for a failed takeover bid.[/R]

The U.S. indexes turned lower after seasonally adjusted new home sales declined to 307,000 and a release of a batch of mixed earnings from several companies. New home sales declined 6.2% in 2011 to 302,000, record low after peaking at 1.28 million in 2005.

Despite the warm weather, heavy discounting by home builders and low interest rates; new home sales struggled in the last month of the year. Median home prices fell 12.8% in 2011 to $210,300.

Weekly jobless claims rose after dropping to a four-year low and durable goods orders increased and core orders excluding volatile transport and defense orders gained 2.9% indicating a tentative strength in business spending.

In merger news, Amgen agreed to acquire Micromet for $1.16 billion.

Netflix soared nearly 20% after it stemmed subscriber loss and the online streaming services provider said it will delay more expansion. SanDisk Corp dropped 10% after it estimated lower than expected sales in the current year. Arctic Cat Inc, the maker of snowmobiles surged on higher than expected sales and the company lifted sale outlook.

AT&T swung to a quarterly loss on one-time charge of $4 billion linked to its failed T-Mobile USA takeover bid. The company added a net total of 2.5 million mobile subscribers to 103 million and activated 7.6 million iPhones and sold in total 9.4 million smartphones.

European markets rallied after Italy raised €5 billion from an auction of short-term debt as borrowing costs fell. European leaders struggle to decide the size of the rescue fund. Nokia swung to loss on lower revenues.

The UK indexes advanced and retail sales fell sharply in January. Irish wholesale inflation increased in December and Anglo American reported fourth quarter iron ore output rose.

Stocks in Japan traded lower as commodities gained in Asian trading. Troubled utility operator Tepco surged on the expectations that the company will accept 1 trillion yen bailout in exchange of two thirds stake. Fanuc, the maker of robots said nine-month earnings increased 22% and sales rose 23%.

Australian stocks gained after inflation in the December quarter was flat and trailed expectations. For the year 2011, inflation increased 3.1%. Rio Tinto confirmed its majority stake in the Canada based Ivanhoe Mines that controls 60% stake in Mongolia based gold and copper mine that has one of the largest deposits in the world.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.93% and 30-year bond closed up at 3.09%.

The U.S. dollar traded flat to $1.31 to one euro and traded lower against the Japanese yen to 77.47.

Immediate delivery futures of Texas crude oil increased 26 cents to $99.66 a barrel and futures of natural gas fell 12 cents to $2.60 per mbtu and gasoline price increased 1 cent to 284.35 cents a gallon.

In metals trading, copper increased 6 cents to $3.88 per pound, gold increased $21.40 to $1,724.40 per ounce and silver increased 22 cents to $33.97.