U.S. Housing Starts Surged 6.9%, BofA Swings to Profit

Arthi Gupta
18 Jul, 2012
New York City

U.S. indexes traded higher after two separate reports on the housing industry indicated a rebound. Olin agreed to acquire K. A. Steel Chemicals for $328 million. Bank of America swings to profit on higher mortgage loans. BlackRock quarterly net declined 11%.

[R]10:00 AM New York – U.S. indexes traded higher after two separate reports on the housing industry indicated a rebound. Olin agreed to acquire K. A. Steel Chemicals for $328 million. Bank of America swings to profit on higher mortgage loans. BlackRock quarterly net declined 11%.[/R]

U.S. indexes jumped after housing starts surged in June to the highest level since October 2008 and shot up 23.6% from a year ago month. Separately, an industry survey reported that builder confidence is at its peak in five years.

Intel reported a 4% drop in earnings and Bank of America swung to quarterly profit on higher mortgage loans income.

Fed Chairman Bernanke is scheduled to appear to a Senate committee for the second day. Yesterday, Bernanke reiterated his cautious views on the economy and said the recovery is “modest” and jobs market is improving “frustratingly slow.”

European indexes gained modestly in early trading after a string of positive earnings from domestic companies.

However, Spanish banks'' bad loan ratio increased to 8.95% of total lending in May from 8.7% in April, the Bank of Spain reported today. Bad loans rose to €155.84 billion in May, the highest since April 1994.

Euro-zone construction activities rose 0.1% from a month ago in May following the 3.7% decrease in April, according to Eurostat.

In the EU, output increased 1.6% sequentially in May from the 6.9% drop recorded in April.

Portugal raised €2 billion from the sale of its 12- and 6-month treasury bills at lower borrowing costs, data from the debt management agency IGCP showed.

The agency sold €1.25 billion of debt due July 2013 to yield 3.505% compared to 3.834% in the previous sale on June 6. The bid-to-cover ratio fell to 2.4 from 2.7.

The treasury also sold €750 million of January 2013 paper to yield 2.292% compared to 2.653% paid on June 6. The bid-to-cover ratio dropped to 3.8 compared to 4.3 last month.

Euro-zone finance ministers are scheduled to meet on July 20 to finalize the €100 billion Spanish bank bailout agreement.

Asian markets traded mixed after comments of the Federal Reserve Chairman Ben S. Bernanke did not lift investor sentiment.

India''s consumer price inflation eased to 10.02% in June from 10.36% a month ago, data from the Central Statistics Office showed. Food and beverages costs climbed 10.71% and fuel and light costs grew 10.34%.

U.S. Housing Starts Rise

Housing starts for June surged 6.9% to a seasonally adjusted annual rate of 760,000 above the revised May estimate of 711,000, according to data released by the U.S. Commerce Department today.

New building permits in June were at a seasonally adjusted annual rate of 755,000, 3.7% below the revised May rate of 784,000.

New housing starts for buildings with five or more units surged 17% and single family housing gained 4.7% in June.

Olin Acquires K. A. Steel Chemicals

Olin Corporation agreed to acquire privately held K. A. Steel Chemicals Inc. on a cash free, debt free basis, for $328 million in cash.

Olin expects the transaction to be immediately accretive to both earnings and cash flow

Earnings Review

Bank of America Corp. ((BAC)), the financial services provider reported second quarter total revenue surged 66% to $21.97 billion. Net income in the quarter swung to $2.5 billion or 19 cents a share compared to a loss of $8.8 billion or 90 cents a share last year.

BlackRock, Inc. ((BLK)), the asset manager reported second quarter total revenues decreased 5% to $2.23 billion. Net income for the quarter declined 11% to $554 million or $3.08 per diluted share from $619 million or $3.21 per share in the previous year.

Intel Corporation ((INTC)), the chipmaker said second quarter revenue rose 3.6% to $13.50 billion from the same quarter last year. Net income for the quarter fell 4% to $2.83 billion compared to net income of $2.95 billion for the year-ago quarter. Earnings per share remained unchanged at 54 cents.

St. Jude Medical, Inc. ((STJ)), the heart devices maker reported second quarter net sales decreased 2% to $1.410 billion from a year ago quarter. Net earnings for the quarter rose 1.2% to $244 million or 78 cents per diluted share compared to $241 million or 72 cents per share in the year-ago quarter.

Yahoo! Inc. ((YHOO)), the Internet company said second quarter revenues fell 1% to $1.22 billion from last year. Net income in the quarter declined 4.4% to $226.6 million compared to $237 million last year. On a per share basis, earnings were unchanged from last year at 18 cents, on a lower share count.