Business News – 11-18-09
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Today’s early business news showed that Housing Starts stopped and mortgage activity continued its slide, and we know why! You’ll see exactly why when we publish our feature article on the subject later today. This report on the day’s business news includes coverage of Housing Starts, Mortgage Activity, Consumer Prices, Petroleum Status, Corporate Earnings, and more. Stocks are only off modestly to start the day, as this bad news is absorbed into a base of recent past improved economic data across the board. However, turns in trend start somewhere, and we may be sitting at the precipice of return to recession, ala double-dip fashion.
Housing Starts Stopped!
The day’s business news highlights the monthly Department of Housing report showing Housing Starts fell to an annual pace of 529K in October, versus misguided expectations for a pace of 600K. We say misguided for good reason, and boy are we itching to tell you why, but that article is prepared and scheduled for publishing later this day. Just come back a little later…
The slower pace of starts represents a 10.6% fall from September’s revised rate of 592K, and is off 30.7% from last year’s pace. Single family Starts were down 6.8% from September. Permits did better, though also slipped. Privately owned housing units authorized by building permits, a forerunner to actual starts, ran at a pace of 552K, versus September’s revised pace of 575K.
Mortgage Activity Falls Further
The day’s business news also highlights a trend we have well-noted previously that continued again in the week ended November 13. Despite lower contracted rates for 30-year and 15-year fixed rate mortgages to 4.83% (from 4.9%) and 4.32% (from 4.33%), respectively, mortgage activity declined. The Market Composite Index measuring overall mortgage volume fell 2.5% on a seasonally adjusted basis. The Purchase Index, which measures loans taken out for home purchases, dropped another 4.7%. The Refinance Index fell 1.4%. Take Note: The MBA’s Index has not been this low since 2000.
Consumer Price Index (CPI)
A day after the Producer Price Index (PPI) offered a nice bit of business news for inflation watchers, the government released information on consumer level pricing. This data, however, was a bit salty. Headline Consumer Prices rose 0.3% in October, against expectations for a 0.2% increase, according Bloomberg’s survey of economists. The government noted the key drivers as energy and new and used motor vehicle price increase. That information led “The Greek” to scratch his head (or my head if I were sane), because we were under the impression that automakers were slashing prices post “Cash for Clunkers.” We welcome your thoughts here auto market enthusiasts. Comment below. The renewal of energy price inflation is no surprise though, as the energy index has now risen five of the last six months. Headline CPI is now only down 0.2% from the prior year check…
Ex-food and energy, or Core CPI, rose a troubling 0.2%, against expectations for a slighter 0.1% increase. We worry about this figure more, because it excludes the wild swings in energy pricing. This represents a more accurate current metric of inflation, and it’s on the rise at a decent pace for a recessionary period. Core prices also increased 0.2% in September.
Petroleum Status Report
At last check – for the week ended November 6, crude oil inventory increased by 1.8 million barrels and stood slightly above the upper limit of the average range for this time of year. Gasoline stores also increased by 2.5 million barrels and stood above the upper limit of the average range. Distillate fuel inventories rose 0.3 million barrels, and also stood at above average levels. Look for the latest data at 10:30 AM.
Corporate News Drivers
Agrium’s (NYSE: AGU) offer of $97.47 for the shares of CF Industries (NYSE: CF) expires today. The shares trade at $85, so the deal is apparently not happening. We have not followed this story, but the price action tells us that – the shares would trade at about $97.47 otherwise. Cisco Systems’ (Nasdaq: CSCO) offer for Tandberg is also set to expire today.
An FDA committee will review Genentech’s (NYSE: DNA) and Novartis’ childhood asthma treatment. Also, a French court rules on Total’s (NYSE: TOT) appeal against environmental damages ruled its fault from a ‘99 incident.
Wednesday’s EPS schedule includes reports from 012 Smile.Communications (Nasdaq: SMLC), TORM A/S (Nasdaq: TRMD), AltiGen Communications (Nasdaq: ATGN), Ameritrans Capital (Nasdaq: AMTC), Birks & Mayors (AMEX: BMJ), BJ’s Wholesale Club (NYSE: BJ), Chico’s FAS (NYSE: CHS), China Sunergy (Nasdaq: CSUN), Cyberonics (Nasdaq: CYBX), Destination Maternity (Nasdaq: DEST), Donaldson (NYSE: DCI), Elbit Systems (Nasdaq: ESLT), Gushan Environmental Energy (NYSE: GU), Gymboree (Nasdaq: GYMB), Hot Topic (Nasdaq: HOTT), Jack in the Box (Nasdaq: JACK), Limited Brands (NYSE: LTD), Mitsubishi UFJ Financial Group (NYSE: MTU), Navios Maritime (NYSE: NM), NetApp Inc. (Nasdaq: NTAP), NetEase.com (Nasdaq: NTES), Pennantpark Investment (Nasdaq: PNNT), Perry Ellis Int’l (Nasdaq: PERY), PetSmart (Nasdaq: PETM), Phillips-Van Heusen (NYSE: PVH), Semtech (Nasdaq: SMTC), Shamir Optical Industry (Nasdaq: SHMR), Solarfun Power Holdings (Nasdaq: SOLF), ValueVision (Nasdaq: VVTV), Woodward (Nasdaq: WGOV) and a few others.