Housing Data Depress Mood

Elena
17 Nov, 2006
New York City

U.S. stock futures declined Friday, following weaker-than-expected data on the housing market. New U.S. homes construction plunged 14.6% in October to the lowest level in six years, while building permits dropped 6.3%, a nine-year low. Starbucks dropped 6.1% after the coffee retailer reported a 5% decline in Q4 profit on a below-forecast 21% sales rise. Dow component Hewlett-Packard lost 0.3% after the company said that the SEC had started a formal investigation into the spying scandal.

[R]9:00AM U.S. stock futures declined after weak housing data.[/R]
U.S. stock futures declined Friday, following weaker-than-expected data on the housing market. Investors turned to profit taking after the Commerce Department said that new U.S. homes construction plunged 14.6% in October to the lowest level in six years, while building permits dropped 6.3%, a nine-year low. Economists had been expecting new home starts to fall 4.5% and building permits to decline 1%. At the same time, oil prices fell to their lowest level in more than a year. Crude oil slipped $1.01 to a 17-month low of $55.25 a barrel.

Disappointing results from Starbucks and the announcement by Hewlett-Packard of a formal SEC investigation also weighed on sentiment. Starbucks ((SBUX)) dropped 6.1% after the coffee retailer reported a 5% decline in Q4 profit on a below-forecast 21% sales rise. Dow component Hewlett-Packard ((HPQ)) lost 0.3% after the company said that the SEC had started a formal investigation into the spying scandal. In other earnings-related news, shares of Gap ((GPS)) slipped 1.5% after the clothing chain reported an 11% profit drop and cut its full- year forecast. In merger-and-acquisition news, Johnson & Johnson ((JNJ)) agreed to buy Conor Medsystems ((CONR)) for $33.50 a share, or $1.4 billion. S&P 500 futures fell 4.10 points to 1,401.00 and Nasdaq 100 futures dropped 8.75 points to 1,801.50. Dow industrial futures shed 23 points to 12,327.

[R]New U.S. homes construction slipped 14.6%.[/R]
The Department of Commerce released its report on housing starts and building permits in the month of October on Friday, showing that housing starts fell much more than economists had been expecting. The report showed that housing starts fell 14.6 percent to a seasonally adjusted annual rate of 1.486 million units in October from the revised September estimate of 1.740 million units. Economists had expected housing starts to fall to a 1.675 million unit rate. The decrease was partly due to a notable drop in housing starts in the South, which fell 26.4 percent to a 705,000 unit rate in October from a 958,000 unit rate in September. Housing starts in the Midwest and West also fell, offsetting a 31 percent increase in the Northeast. Building permits also dropped, falling 6.3 percent to a seasonally adjusted annual rate of 1.535 million units in October from the revised September rate of 1.638 million units. The drop in building permits may raise some concerns about the outlook for the housing market.


[R]8:00AM Hewlett-Packard reported quadrupled q4 profit.[/R]
Hewlett-Packard Co. ((HPQ)) said that Q4 earnings quadrupled but the SEC had ordered a formal probe of its boardroom spying scandal. HP earned $1.7 billion or 60 cents per share, compared with $416 million, or 14 cents per share last year, due to higher sales of laptop computers, printers and servers. Excluding one-time charges, the company’s profit rose 27% to $1.9 billion, or 68 cents per share from the same quarter last year, beating expectations of 64 cents per share on sales of $24.1 billion for the quarter. Fourth-quarter sales increased 7% to $24.6 billion, compared with $22.9 billion last year.

HP''s annual revenue surpassed $90 billion for the first time. For 2006, the company earned $6.2 billion, or $2.18 per share, compared with $2.4 billion, or 82 cents per share. Sales for the year were $91.7 billion, compared with last year''s total of $86.7 billion. The company projected Q1 earnings of 2007 to be between 55 cents and 57 cents per share, or between 60 cents and 62 cents per share excluding one-time charges, on revenue of between $24.1 billion to $24.3 billion. For 2007, earnings are expected to be between $2.28 and $2.33, or between $2.48 and $2.53 excluding one-time charges. Annual revenue is expected to be about $97 billion.

Shares of HP fell 53 cents to $39.60 in after-hours trading Thursday, as HP said in a regulatory filing that the SEC had started a formal investigation into the spying scandal.


[R]7:30AM Asian markets close mostly higher Friday, Japan slips on bank worries.[/R]
Asian markets ended broadly higher on Friday. The benchmark Nikkei 225 index in Tokyo shed 0.45%, to close at 16091.73 points. The market was in positive territory at first, following record highs in New York overnight, but the index fell later as investors took to profit-taking in the scarcity of fresh earnings or new data. Mitsui shed 3.8% and oil company Inpex Holdings lost 3.51%.

In Australia, the benchmark S&P/ASX200 index gained 0.5% to 5419.7. The market bounced back from recent losses on the back of financial stocks, with National Australia Bank up 1.2%. Babcock & Brown soared 6.3% on plans for an offshore funds-management business with joint-venture partner GPT Group, which gained 2.1%.

The Kospi in South Korea finished up 0.1%, at 1412.22. South Korean markets were buoyed by airline and shipping stocks, although gains were mostly erased by losses in technology shares. Korean Air jumped 3% and Asiana Airlines advanced 2.2%. Hyundai Merchant Marine, added 4.2% and Hanjin Shipping moved 1.8% higher.

In Hong Kong, the Hang Seng Index closed 0.15% higher at 19182.71. Taiwan markets moved slightly up as the Weighted Price Index of the Taiwan Stock Exchange advanced 0.03% to 7259.54. mobile phone and display makers were weak and countered advances in automobile, memory chips, and personal-computer stocks.


[R]6:30AM European markets dropped in early trading Friday on weak oil shares.[/R]
European markets were lower in early trading on Friday. By mid morning, the FTSE 100 in London was 0.2% lower to 6,239.8, Frankfurt Xetra Dax gained 0.1% to 6,449.23, and the CAC 40 in Paris lost 0.4% to 5,483.12.

Decliners

Oil stocks led the decliners on Friday. Norsk Hydro fell 4.1%, while domestic rival Statoil shed 4.1%. Finnish refiner Neste Oil was down 2.1%, Repsol of Spain lost 2%, while French Total fell 1.9%.

Advancers

Richemont, the Swiss luxury goods group, gained 2.8% after reporting a better-than-expected 22% rise in first-half net profit, thanks to growth in demand for expensive watches. The company said it was confident that full-year results would be significantly ahead of last year.

French luxury goods maker Hermes International gained 3.7%. German chipmaker Infineon gained 1.8% after ABN Amro raised its rating on the company from hold to buy and lifted its price target. Hypo Real Estate, the German property lender, gained 2.1% after West LB raised its price target on the stock from add to buy.

Oil and gold

Oil declined $56 on Friday to its lowest level in a year. U.S. crude was down 76 cents at $55.50 a barrel. London Brent crude was 48 cents lower at $58.06.

Gold opened Friday at a bid price of $617.80 a troy ounce, down from $624.40 late Thursday.

Currencies

The euro edged slightly down against the dollar Friday on positive economic news from the United States. The euro bought $1.2776 in late morning European trading, compared with $1.2795 in New York late Thursday. The British pound slipped to $1.8848 from $1.8882. The dollar was up against the Japanese yen, buying 118.35 yen from 118.19 yen on Thursday.