Tuesday, November 18, 2014

Higher markets on homebuilder confidence

Dow climbed 37, advancers over advancers 2-1 & NAZ jumped 26.  The MLP index went up 1 to the 507s & the REIT index was fractionally higher in the 317s.  Junk bond funds were mixed & Treasuries gained a little.  Oil dropped below 75 after investors weighed the likelihood of OPEC production cutback & gold edged higher.

AMJ (Alerian MLP Ind tracking fund)

CLZ14.NYM....Crude Oil Dec 14...74.98 Down ...0.66  (0.9%)

GCX14.CMX...Gold Nov 14.....1,182.70 Down ...0.30  (0.0%)

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Confidence among US homebuilders rebounded in Nov as low interest rates & a strengthening job market helped boost sales.  The National Association of Home Builders/Wells Fargo builder sentiment gauge advanced to 58, matching the 2nd-highest level since 2005, from 54 in Oct.  The forecast called for the index to rise to 55.  Mortgage rates that are hovering near 4% & unemployment at a 6-year low are giving more Americans the confidence to enter the market.  At the same time, wage growth has been lackluster & property values have climbed, making homeownership prohibitively expensive for some first-time buyers.  “Growing confidence among consumers is what’s fueling this optimism among builders,” NAHB Chairman Kevin Kelly said.  “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”  Readings greater than 50 mean more respondents report good market conditions.  This month’s gauge is just short of the 9-year high of 59 reached in Sep.  The homebuilder group’s index of current single-family sales increased to 62 in Nov from 57.  A gauge of prospective buyer traffic climbed to 45 from 41, while the 6-month sales outlook rose to 66 from 64.  The housing market has been supported by borrowing costs near historic lows.  The average 30-year, fixed-rate mortgage was 4.01% last week according to Freddie Mac.

Homebuilder Confidence Rebounds as U.S. Buyers More Enthusiastic

German investor confidence rose for the first time in 11 months after Europe's largest economy avoided relapsing into a recession.  The ZEW Center for European Economic Research said its index of investor & analyst expectations, which aims to predict economic developments 6 months in advance, increased to 11.5 in Nov from minus 3.6 in Oct.  The forecast was for a rebound to 0.5.  Germany’s GDP expanded 0.1% in Q3, after contracting in Q2, to join a gradual euro-area revival that extended from France to Greece.  The ECB has implemented unprecedented stimulus measures to bolster the regional recovery & has pledged more if needed.  GDP in the 18-nation euro area increased 0.2% in Q3, more than forecast.  Greece recorded quarterly growth of 0.7%, while France expanded 0.3%.  “The recent growth figures for the euro area suggest that the economy is stabilizing,” ZEW President Clemens Fuest said.  “However, the economic environment remains fragile, not least due to ongoing geopolitical tensions.”  A measure of the current situation in Germany rose to 3.3 from 3.2 the previous month & a gauge of expectations for the euro area jumped to 11 from 4.1.  Germany’s economy lagged behind the region as a whole in Q3.  Growth was driven primarily by private consumption as equipment investment dropped, construction fell & inventories contracted.  The gov cut its growth forecasts last month, & the Bundesbank said yesterday that the economy will lack momentum until at least the end of this year.

German Investor Confidence Rebounds as Recession Averted

Home Depot, a Dow stock, fell after failing to raise its forecasts for sales & profit this year amid signs the housing market is cooling.  Revenue in the fiscal year thru Jan will increase 4.8%, HD said.  The projection translates to revenue of about $82.6B, slightly below the analyst estimate of $82.64B.  CEO Craig Menear, takes over the largest home-improvement retailer amid slowing gains in US home prices & sales.  HD also reiterated that it expects EPS in the current fiscal year to increase 21% to $4.54.  That figure includes an estimated $34M in costs related to the data breach it disclosed in Sep as well as the benefit of the company’s $7B in year-to-date & planned share buybacks.  Analysts estimated EPS of $4.53.  EPS was $1.15, above the $1.13 estimate.  Sales rose 5.4% to $20.5B, also topping projections.  If a gain from the sale of its stake in HD Supply Holdings & costs related to a data breach disclosed during the qtr were excluded, EPS would have been $1.12.   Same-store sales rose 5.2% in the qtr.  Analysts projected a gain of 5%, according to Consensus Metrix.  The retailer had 355M transactions during the qtr, 3.2% more than a year earlier, & the average sale rose 2.3% to $57.55.  The stock fell 92¢.  If you would like to learn more about HD, click on this link:

Home Depot Falls After Failing to Raise Forecasts

Home Depot (HD)

Homebuilder confidence outweighed the HD earnings report.  Dow is trying to reach a new record high which it will probably do.  However numerous threats are out there, starting with a deeply divided DC.  That's troubling for the markets.

Dow Jones Industrials

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