Thursday, July 17, 2014

Lower markets on new homes data

Dow lost 5, decliners over advancers 3-2 & NAZ was off 9.  The MLP index slipped a fraction to 520 & the REIT index was off pennies in the 307s.  Junk bond funds edged higher & Treasuries rallied with the yield on the 10 year Treasury back down to 2.5%.  Oil has a good gain & gold edged higher, going over 1300.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM...Crude Oil Aug 14...102.76 Up ...1.56 (1.5%)

GCN14.CMX...Gold Jul 14.........1,298.40 Down ...1.20  (0.1%)

Housing Starts
Photo:   Bloomberg

Home construction unexpectedly declined in Jun to a 9-month low as a record plunge in the South swamped gains in the rest of the US.  Housing starts fell 9.3% to an 893K annualized rate from a 985K pace in May that was weaker than initially estimated, by the Commerce Dept.  The estimate called for a 1.02M rate.  Construction slumped 29.6% in the South to a 375K pace, the weakest in almost 2 years.  The figures, along with a decline in building permits, corroborate Federal Reserve (FED) view that progress in the housing market has been “disappointing” this year.  Building permits decreased 4.2% to a 963K annualized rate, after falling in May.  They were projected to rise to 1.04M.  3 of 4 regions had an increase in total housing starts, led by a 28.1% jump in the Midwest to a 219K annualized rate, the strongest in 7 years.  Construction of single-family houses declined 9% to a 575K rate, the weakest since Nov 2012.  The drop was influenced by a 20.1% plunge in the South, the biggest decrease in 4 years.  Work on multifamily homes, such as apartment buildings, fell 9.9% to a 318K rate.  Residential real estate has been slow to emerge from an early-year, winter-driven slump. 

Construction of New U.S. Homes Declines on Plunge in South

The number of Americans filing applications for unemployment benefits unexpectedly dropped last week, showing further healing in the labor market.  Jobless claims declined 3K to 302K, according to the Labor Dept.  The forecast projected 310K.  The number continuing to receive jobless benefits fell to a 7-year low.  Waning dismissals are signaling the labor market is gaining additional momentum 5 years since the end of the last recession.  A pickup in hiring & drop in unemployment are among reasons FED is reducing monthly asset purchases & plans to bring an end to the stimulus program by the end of the year.  Last week’s report covers the week of the gov survey that will be used to calculate Jul payroll & unemployment data.  The 4 week average of jobless claims declined to 309K, the lowest since Jun 2007, from 312K in the prior week.  The number continuing to receive jobless benefits dropped 79K to 2.51M in the latest week.  The unemployment rate among people eligible for benefits fell to 1.9% from 2%.

Jobless Claims in U.S. Unexpectedly Decreased Last Week

UnitedHealth, a Dow stock, beat the earnings estimates as revenue grew from its technology & consulting unit that helped fix the Obamacare insurance website.  EPS was $1.42, versus $1.40 a year earlier.  EPS beat by 16¢ the $1.26 estimate.  Revenue rose 7% to $32.6B, led by an increase in customers in Medicaid, the administrator of health benefits for the poor, & a 28% boost in sales for the company’s technology, consulting & prescription drugs unit (Optum).  Sales at Optum grew $2.6B.  The business manages drug benefits & works with hospitals, employers & govs to lower health costs.  It’s also been credited with helping to fix the US website for people to enroll in insurance under Obamacare.  But Obamacare requirements & fees cut profit by about 0.9 percentage points.  The law also grew the company’s business in Medicaid, which was expanded under Obamacare.  This year, the insurer added 650K thru the program, CEO Stephen Hemsley said.  “We see the next 18 months as important, given that by January, 2016, the ACA will largely be in place and we will be entering an election cycle that will set the stage for shaping the next phases of health reform,” he said.  “In the individual market, we plan to grow next year, as we expand our offerings to as many as two dozen state exchanges.”  The company raised the bottom end of its full-year EPS forecast, saying it expects EPS of $5.50-$5.60 in 2014, up from $5.40-$5.60 per share.  The company expects revenue of $130B, an increase of as much as $20B from its previous estimate.  “Our focus on executing on fundamental details, delivering innovative and responsive services that consumers value and building deeper relationships is creating stronger momentum and improving our outlook,” said Hemsley.  The company added 270K customers in Q2 with most coming from gov & senior insurance plans & its expansion outside the US.  Revenue from its Medicare & retirement plans grew 7% to $11.8B.  The company saw a decrease in revenue from its US commercial division, which provides coverage to individuals & employers.  The stock jumped 2.91.  If you would like to learn more about UNH, click on this link:

UnitedHealth’s Obamacare-Fixing Technology Business Aids Earnings Results

UnitedHealth Group (UNH)

Stocks aren't doing much with a small negative bias.  New sanctions on Russia are depressing the market, but the weaker data on news homes is more important in the selling today. 

Dow Jones Industrials

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