Wall Street Advances on Orders, Housing Data; World Markets Cautious

Bikram Pandey
27 Jun, 2012
New York City

U.S. stocks advanced after durable goods orders rose for the first time since February and pending home sales increased. The pace of improvement though small and halted supported market enthusiasm on the rising merger activities.

[R]4:00 PM New York – U.S. stocks advanced after durable goods orders rose for the first time since February and pending home sales increased. The pace of improvement though small and halted supported market enthusiasm on the rising merger activities.[/R]

U.S. indexes climbed after durable goods orders rose, pending home sales increased and merger activity continued for the second day in a row.

Orders for goods that are expected to last at least three years increased 1.1% in May, the first gain since February according a government report. The orders increased after a revised 0.2% drop in April. For the year to the month, orders declined 6.8% in the first four months and though the orders improved in May the trend for consumer spending is still soft.

Orders for non-defense capital goods increased 1.6% after excluding for volatile aircraft orders. Capital goods shipment in the month increased 0.4% after falling 1.5% in the previous month.

Pending home sales increased 5.9% in May after falling 5.5% in April according to the industry association. Housing market appears to be in a slow recovery mode and pending sales increased 15.3% in May after rising 14.7% in April. Contracts of home sales across the nation and were led by 14.5% surge in the West.

Merger activity heat up for the second day and Loral agreed to sell Space Systems for $1 billion. Liberty Global and Searchlight agreed to buy OneLink for $585 million. SS&C Technologies acquired GlobeOp for £572 million.

General Mills fourth quarter net was ahead of expectations but issues a weak 2013 outlook. Lennar soared after quarterly profit surged to $452.7 million. Monsanto third quarter net increased 1.6% to $937 million.

Pressure on European leaders intensified as Spain slides closer to a bailout as the recession deepens and government faces unsustainable cost of debt refinancing. Italy sold €9 billion of 6-month bills at higher yields. French jobless rate forecasted to deteriorate this year.

UK based Barclays agreed to pay fines of more than $450 million to the U.S. and UK regulatory authorities after the bank admitted to manipulating the Libor, the London interbank offered rate.

The interbank rate is used by several trillions of dollars of international contracts to set terms of loans and has been a benchmark or a reference rate for many international loans.

Barclays agreed to pay $200 million to Commodity Futures Trading Commission and $160 million to the U.S. Department of Justice and 59.5 million pounds to the UK’s Financial Service Authority. The European Commission is expected to levy its fine separately for the bank’s misconduct in brazenly attempting to manipulate euribor.

More banks are expected to be fined as at least ten regulatory agencies from around the world are looking at the conduct of 20 global banks at the height of financial crisis in 2007 and 2008.

Chief executive Bob Diamond and three other executives agreed to forego any potential bonus this year. Diamond said, “When we identified issues, we took prompt action to fix them and cooperated extensively and proactively with the authorities.”

Reckless lending and the lack of supervision among large banks was the root cause of the financial crisis that eventually brought the economies of the U.S. and UK into the deepest recession in seventy years that put twenty million additional people on the unemployment rolls in two countries.

In to the fourth year of economic weakness, banks continue to fight regulatory oversight and dole out billions in bonuses when small businesses and consumers face hurdles in accessing bank loans.

Japanese stock indexes increased for the first time after three days of losses on a rebound in consumer focused stocks and home builders. Construction companies gained on the hopes of advance purchases ahead of sales tax increase in 2014.

Australian stocks rebounded after losses of four days and stocks in the resource, media and banking sector led the gainers. News Corp gained on the hopes that the controversial media group may separate its maligned news division from its popular and larger entertainment unit.

Commodities, Bonds and Currencies

The 10-year bond yield increased to 1.62% and 30-year bond rose to 2.69%.

The U.S. dollar inched up to $1.246 to a euro and fell against the Japanese yen to 79.70 yen.

Immediate delivery futures of Texas crude oil increased 88 cents to $80.24 a barrel and Brent crude added 46 cents to $93.48, futures of natural gas increased 0.0007 cents to $2.774 per mbtu and gasoline price decreased 2.5 cents to 261.96 cents a gallon.

In metals trading, copper added 3.3 cents to $3.35 per pound, gold increased $1.00 to $1,575.90 per ounce and silver decreased 18 cents at $26.93.