Archive for May, 2010

Stocks little changed after rise in home starts (AP)

Tuesday, May 18th, 2010 | Finance News

NEW YORK – A jump in home construction and upbeat earnings from Wal-Mart are holding stocks steady.

The market is getting support Tuesday from a more stable euro, the currency shared by 16 European nations. The euro's move off its lows indicates investors are a little more confident about Europe's ability to prevent its debt crisis from spreading to other economies including the U.S.

Meanwhile, the Commerce Department says home construction jumped 5.8 percent in April, more than expected and the strongest level since late in 2008.

And Wal-Mart is up 2.8 percent after its earnings report beat expectations.

At midday, the Dow Jones industrials are down 10 at 10,616. The Standard & Poor's 500 index is down 3 at 1,134. The Nasdaq composite index is down 17 at 2,337.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

NEW YORK (AP) — A jump in home construction and upbeat earnings from Wal-Mart Tuesday pushed most stocks higher. The Dow Jones industrial average rose about 40 points.

Stocks also got a boost from a more stable euro, the currency shared by 16 European nations. The euro has been driving trading for weeks. Its move off its lows indicates investors are a little more confident about Europe's ability to contain its debt crisis and prevent it from spreading to other economies including the U.S. The euro hit a four-year low on Monday.

The euro's modest rebound came as European leaders meet to work out details of the almost $1 trillion rescue package agreed to last week. The bailout will provide countries like Greece access to cheap loans so they can avoid defaulting.

While so much attention has been focused on Europe in recent weeks, investors have largely ignored signs of economic growth. Stocks had been posting solid gains earlier in the year on steady signs of improvement in the U.S. economy.

But encouraging signals on the economy helped lift stock prices Tuesday. The Commerce Department said home construction jumped 5.8 percent in April, more than expected and the strongest level since late in 2008.

Wal-Mart Stores Inc., the world's largest retailer and one of the stocks that makes up the Dow Jones industrials, rose 2.8 percent after reporting better-than-expected earnings.

In late morning trading, the Dow rose 38.09, or 0.4 percent, to 10,663.92. The Standard & Poor's 500 index rose 2.11, or 0.2 percent, to 1,139.05, while the Nasdaq composite index fell 6.27, or 0.3 percent, to 2,347.96.

The Dow recovered from a drop of 184 points on Monday to end with a gain of about 6 points after the euro strengthened.

Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.44 percent from 3.50 percent late Monday.

Gold fell, while crude oil rose $1.77 to $71.85 per barrel on the New York Mercantile Exchange.

In other economic news, a Labor Department report indicated that inflation remains benign.

The Producer Price Index, which measures the price of goods before they reach consumers, fell 0.1 percent in April because of a drop in food and energy prices. Economists polled by Thomson Reuters had forecast a jump of 0.1 percent.

Excluding volatile food and energy prices, the index rose 0.2 percent in April, just slightly higher than analysts expected.

Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 416.7 million shares, compared with about 426.8 million traded at the same point Monday.

The Russell 2000 index of smaller companies rose 1.34, or 0.2 percent, to 697.05.

In afternoon trading, Britain's FTSE 100 index rose 0.7 percent, Germany's DAX index gained 1.3 percent, and France's CAC-40 rose 1.9 percent. Earlier, Japan's Nikkei stock average rose 0.1 percent.

Source

New home construction rises, wholesale prices dip (AP)

Tuesday, May 18th, 2010 | Finance News

WASHINGTON – Construction of homes surged in April to the highest level in 18 months, fueled by buyers capitalizing on an expiring tax credit. Permits for new construction sank, signaling the rebound could fade.

Low mortgage rates and two tax credits — up to $8,000 for new buyers and $6,500 for current owners who buy and move into another home — have boosted home sales this year. To receive a tax credit, borrowers had to have a signed offer by April 30 and must close the deal by the end of June.

The rate of home building has now risen more than 40 percent from the bottom in April 2009, though it's still down 70 percent from the decade's peak in January 2006.

Without the tax credit, analysts say home sales will slow in the second half of this year. High unemployment and tight lending standards will likely help keep many buyers away.

The report Tuesday from the Commerce Department said the rate of construction of single-family homes and apartment buildings rose 5.8 percent last month to a seasonally adjusted annual rate of 672,000. That was up from an upwardly revised March level of 635,000. The rate, the highest since October 2008, was driven by a 10 percent increase in single-family home building.

A separate report Tuesday showed wholesale inflation remains tame. Prices fell 0.1 percent in April, the second drop in three months. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, the Labor Department said. But over the past year, core prices are up just 1 percent.

The absence of inflation pressures means the Federal Reserve can keep interest rates at record lows to bolster the economic recovery.

In the Commerce report, the government said building permits, a gauge of future activity, sank 11.5 percent to an annual rate of 606,000. That's the lowest point since October 2009.

Still, a survey Monday showed homebuilders are feeling more optimistic. The National Association of Home Builders said its housing market index, which tracks industry confidence, rose three points this month to 22, the highest reading since August 2007. Readings below 50 indicate negative sentiment.

In March, sales of new homes rose 27 percent in March. That was the biggest monthly increase in 47 years.

A four-decade low stockpile of new single-family homes, combined with low interest rates and prices, has made home buying affordable, said Sal Guatieri, an economist with BMO Capital Markets. That means that even without the tax credits, housing starts should rise modestly.

"Until the foreclosure wave ebbs and the overhang of unsold existing homes abates, the recovery in homebuilding will be subdued, Guatieri said.

For April, food costs dipped by 0.2 percent. It was the first decline in nine months. And it came after a 2.4 percent surge during the previous month — the largest gain in 26 years. The March increase reflected the impact of a winter freeze in Florida that damaged citrus and vegetable crops.

Energy prices fell 0.8 percent in April with gasoline prices down 2.7 percent.

The rise in core inflation followed two straight months of 0.1 percent gains. Household appliances posted a 1.9 percent jump, the largest since October 1974. Passenger car prices rose 0.6 percent. It was the biggest such increase since June.

Economists predict a report on consumer prices on Wednesday will also show slight price pressures. They are predicting overall prices and core inflation will both post 0.1 percent gains.

The recession has banished inflation for now. The more than 8 million jobs lost over the past two years has left workers without the bargaining power to boost wages.

In addition, companies, facing slack demand and idle plant capacity, have lacked the ability to raise prices.

The absence of inflation has allowed the Fed to keep its benchmark federal funds rate at a record low of zero to 0.25 percent since December 2008. The Fed has sought to invigorate economic growth.

Some Fed officials have argued that the greater threat now is the risk of deflation, or a debilitating drop in prices. That is something the United States has not suffered since the Great Depression.

Source

Home construction up, building permits fall (AP)

Tuesday, May 18th, 2010 | Finance News

WASHINGTON – Construction of new homes rose more than expected in April but new building permits fell sharply, signaling the industry's rebound could be short-lived.

The results show builders ramped up to meet demand from buyers seeking to take advantage of federal tax incentives, but are now scaling back their plans.

Building permits, a gauge of future activity, sank 11.5 percent to an annual rate of 606,000, the lowest since October 2009, the Commerce Department said Tuesday. Analysts were expecting a slight dip to a rate of 680,000.

Home sales have rebounded this year. They were helped by low mortgage rates and two government tax credits — $8,000 for new buyers and $6,500 for current owners who buy and move into another property. To receive the tax credit, borrowers had to have a signed offer by April 30 and must close the deal by the end of June.

"There is little doubt the housing numbers have been boosted," by the tax credit, wrote Dan Greenhaus, chief economic strategist with Miller Tabak + Co.

Without the tax credits, many experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight standards for mortgage lending continue to keep many buyers on the sidelines.

Construction of new homes and apartments rose 5.8 percent last month to a seasonally adjusted annual rate of 672,000. The increase was from an upwardly revised March level of 635,000.

The result was the highest since October 2008 and was driven by a 10 percent increase in the single-family market. Housing construction is now up more than 40 percent from the bottom in April 2009 but down 70 percent from the peak in January 2006.

Analysts surveyed by Thomson Reuters had expected construction to rise more modestly to a rate of 650,000.

Nevertheless, a survey Monday showed homebuilders are feeling more optimistic. The National Association of Home Builders said its housing market index, which tracks industry confidence, rose three points this month to 22, the highest reading since August 2007. Readings below 50 indicate negative sentiment about the market.

Sales of new homes rose 27 percent in March, the biggest monthly increase in 47 years. Still, new home sales are down 70 percent from their peak in July 2005.

Source