Tuesday, June 19, 2012

Markets rise on increased housing starts

Dow rose 108, advancers over decliners better than 6-1 & NAZ gained 31.  The Financial Index added 2+ to 195, its highest level in more than a month.

The MLP index shot up 4+ to the 366s & the REIT index was up 1+ to the 256s.  Junk bond funds rose but Treasuries fell, bringing higher yields.  Oil advanced as Spanish bond yields declined after the gov met its target at a bill auction & European creditors prepared to ease Greece’s bailout terms.  Gold continues in sideways trading.

MLP (Alerian MLP index tracking fund)

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Treasury yields:

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CLN12.NYM....Crude Oil Jul 12...84.23 ...Up 0.96  (1.2%)

GCM12.CMX...Gold Jun 12....1,622.80 ...Down 2.90  (0.2%)

Get the latest daily market update below:

Housing Starts in U.S. Probably Climbed in May on Lower Rates

Photo:    Bloomberg

Builders broke ground on more single-family houses for a 3rd consecutive month in May & rising construction permits pointed to further gains.  Work began on 516K one-family houses last month, up 3.2% from Apr & the most this year, according to the Commerce Dept.  However, a slump in construction of apartments, which can be volatile, led to an unexpected drop in total housing starts.  Building permits, a proxy for future construction, climbed to the highest level since Sep 2008, showing the combination of lower prices & record-low mortgage rates is stimulating demand & encouraging new projects.  Total starts dropped 4.8% to 708K in May from a revised 744K in the prior month (the highest since Oct 2008).  The forecast was for 722K.  Building permits increased 7.9% to 780K, reflecting gains in single-family & multifamily homes.

Housing Starts in U.S. Fall 4.8% in May on Apartments

Walgreen to Acquire 45% Alliance Boots Stake For $6.7 Billion

Photo:   Bloomberg

Walgreen, a Dividend Aristocrat, will pay $6.7B for 45% of the  UK’s Alloiance Boots to create a global chain of pharmacies.  This will be paid with $4B in cash & the remainder in stock, with an option to gain full control in about 3 years.  The stake is being acquired from a group led by KKR & Alliance Boots Chairman Stefano Pessina, who bought the company in a £12.1B ($19B) buyout 5 years ago.  The combination gives WAG the UK.’s largest drugstore-chain company, with more than 11K stores in 12 countries & 370 distribution centers.  WAG will be able expand into emerging markets as well.  WAG has an option to buy the remaining 55% in 3 years.  The stock dropped 1.86 (6%) on the news.

Walgreen to Buy 45% Stake in Boots for $6.7 Billion

Walgreen (WAG)

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In Apr, employers posted the fewest job openings in 5 months, suggesting hiring will remain sluggish in the months ahead.  The Labor Dept said that job openings fell to a 3.4M, down from 3.7M in Mar (the highest in nearly 4 years).  The decline could mean employers are growing more cautious about adding workers in the face of financial turmoil in Europe & slower growth in the US.  Job openings can take 1-3 months to fill.  There were 12.5M unemployed in Apr.  That means there was an average of 3.7 people competing for each open job.  In a healthy job market, the ratio is usually around 2 to 1.  Openings have risen by almost a 1/3 since the recession ended in Jun 2009, but they are still below pre-recession levels of 5M per month.  The decline in openings has coincided with a sharp slowdown in hiring.  Employers added an average of only 73K jobs in Apr & May, down from a monthly average of 226K in Q1.  Fewer people quit their jobs last month, a pessimistic sign because more quits are evidence that workers are confident that they can find new jobs elsewhere.

US employers post fewest job openings in 5 months AP

Buyers are back, bidding up stock prices.  The housing data is encouraging, but the industry is still a long way form a robust recovery.  The € is up to $1.27, 3¢ above its recent lows, on word that the money guys will grade easy, helping troubled countries muddle by.  The markets may also be hoping for a QE3 out of the FOMC meeting.   I don't think so, but nobody knows.  The decision on Obamacare from the Supreme Court should come any day & that can be a market mover.   Dow is up 750 off its lows last month.

Dow Jones Industrials:

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