U.S. Housing Starts Surge, Intel, IBM Disappoint

Arthi Gupta
17 Oct, 2012
New York City

U.S. indexes traded sideways after housing starts surged to a four-year high in September but IBM and Intel reported weak earnings reports. Exxon Mobil Canada agreed to acquire Celtic for C$3.1 billion and HCP agreed to purchase 133 senior housing communities for $1.73 billion.

[R]10:50 AM New York – U.S. indexes traded sideways after housing starts surged to a four-year high in September but IBM and Intel reported weak earnings reports. Exxon Mobil Canada agreed to acquire Celtic for C$3.1 billion and HCP agreed to purchase 133 senior housing communities for $1.73 billion.[/R]

U.S. indexes traded sideways in early morning trading after housing starts rose to a four-year high in September and weak earnings reports from Intel, IBM and Apollo Group.

Tech stocks were under pressure after IBM ((IBM)) reported lower than expected revenues on the weakness in hardware sales and Intel ((INTC)) missed earnings estimates on a decline in personal computer sales. Intel also guided lower outlook for revenues and gross margin in the current quarter.

Home builders and do-it-yourself retailers traded higher after home construction surged and new building permits soared above estimates.

Home Depot ((HD)) and Lowe’s ((LOW)) jumped after the release of housing report and Lennar ((LEN)) added 3% and KB Home ((KBH)) jumped 7%. D.R. Horton ((DHI)) and Hovnanian ((HOV)) jumped more than 3%.

European indexes edged higher and Moody''s Investors Service confirmed Spain''s Baa3 government bond rating but assigned a negative outlook. The pressure mounted on Spain to finalize its bailout request which the government has been resisting.

Asian markets closed higher and market indexes in Tokyo jumped more than 1% after Japan’s Prime Minister Yoshihiko Noda asked its Cabinet to draft an economic stimulus package.

Market indexes in Shanghai gained 0.3% and in Australia jumped 0.8% to close at a 15-month high. Indexes in Hong Kong jumped 1% and in India gained 0.2%.

U.S. Housing Starts Surge

U.S. housing starts surged in September, according to a report released by the U.S. Commerce Department today,

Seasonally adjusted housing starts soared 15% to an annual rate of 872,000 in September from the revised August estimate of 758,000 and 34.8% above the September 2011 rate of 647,000.

Single-family housing starts rose at an annual rate of 11% in September to 603,000; from the revised August data of 543,000.

Building permits surged 11.6% to an annual rate of 894,000 in September from the revised August rate of 801,000 and 45.1% above the September 2011 estimate of 616,000.

Single-family authorizations in September were at a rate of 545,000; 6.7% above the revised August data of 511,000.

ExxonMobil Acquires Celtic Exploration

Exxon Mobil Corp. said its Canadian unit has agreed to buy Celtic Exploration Ltd. for C$3.1 billion.

Under the terms of the agreement, ExxonMobil Canada will acquire 545,000 net acres in the liquids-rich Montney shale, 104,000 net acres in the Duvernay shale and additional acreage in other areas of Alberta.

Celtic shareholders will receive C$24.50 per share and half a share of a newly established company which will hold assets not included in the agreement with ExxonMobil Canada.

HCP to Acquire Senior Housing Portfolio

HCP Inc. agreed to acquire 133 senior housing communities for $1.73 billion, from a joint venture between Emeritus Corporation and Blackstone Real Estate Partners VI, an affiliate of The Blackstone Group.

Earnings Review

Bank of America Corp. ((BAC)) reported third quarter total revenue, net of interest expense, declined 28% to $20.43 billion from the same quarter last year. Net income in the quarter plunged to $340 million or breakeven per diluted share compared to $6.2 billion or 56 cents per diluted share in the quarter a year ago.

Halliburton Company ((HAL)), the oilfield services provider reported third quarter total revenue rose 9% to $7.11 billion from $6.55 billion in the year-ago period. Net income declined to $602 million or 65 cents per diluted share, from $683 million or 74 cents a share in the previous-year quarter.

International Business Machines Corp. ((IBM)), the information technology company reported third quarter revenues fell 5.4% to $24.75 billion compared to last year. Net income dipped 0.4% to $3.82 billion, down from $3.84 billion last year. On a per share basis, earnings were $3.33 compared to $3.19, on a lower share count.

PepsiCo, Inc. ((PEP)), the food and beverage manufacturer said third quarter net revenue fell 5% to $16.65 billion from the year-ago quarter. Net income for the quarter fell to $1.9 billion or $1.21 a diluted share from $2 billion or $1.25 per share last year.