Image by Zach "Pie" Inglis via Flickr
KEY CORE HOME BUILDING 19 MONTH UP CYCLE
Shares in homebuilders surged on Thursday as a measure of pending home sales reached its highest level in 19 months.
PulteGroup climbed 6.1 per cent to $6.31, DR Horton close up 4.4 per cent to $12.74 and Lennar Corporation rose 4.6 per cent to $19.86,Building supplier Masco Corp also rose 8.4 per cent to $10.70 for the best performance in the S&P 500.
The rise in the National Association of Realtors pending home sales index, which is based on contract signings was the second data boost for homebuilders this month, after construction starts hit their highest level in a year in November. Lennar, DR Horton and PulteGroup are all now up more than 40 per cent in the quarter to date.
Elsewhere Wall Street brushed off a rise in US jobless claims to record solid gains on as financial stocks bounced off a difficult previous session.
The S&P 500 climbed 1.1 per cent to 1,263.02, moving back into positive territory for the year. The Dow Jones Industrial Average also climbed 1.1 per cent to 12,287.04 and the Nasdaq Composite index was up 0.9 per cent to 2,613.74.
Although new jobless claims ticked up 15,000 in the week ending December 24, but Andrew Wilkinson, chief economic strategist at Miller Tabak, said that should not hold back US markets:
“[The rise] is marginally more than was predicted but at 381,000 [claims] remain comfortably below that 400,000 line in the sand that points to steady job creation,” he wrote to clients.
The financial sector of the S&P 500 climbed 1.6 per cent, outperforming all other sectors.
Bank of America climbed 3.3 per cent to $5.46 and JPMorgan Chase was up 2.4 per cent to $33.42, although bank stocks were recovering from a poor day on Wednesday, when they had significantly underperformed the market.
Yahoo climbed 2.2 per cent to $16.13 on reports that Alibaba, a potential suitor for the internet portal company, had hired lobbyists, raising speculation of more bidding activity.
Shares in Mosaic, a fertiliser maker, fell fractionally to $50.28, after the company said it will cut output by as much as 250,000 metric tonnes through the first quarter of 2012 because of low prices for phosphate products.
Shares in Amazon were also down a few cents to $173.86, even though the company reported it sold a record number of Kindle devices, running into the “millions”, over the holiday period.
Investors seemed focused on a negative research note from Goldman Sachs which reported that Christmas shopping data released by comScore, a digital research company, implied that Amazon’s 2011 sales will come in at $17.87bn. That would be slightly below analyst expectations of $18.19bn.
“For [Amazon] to materially appreciate in the near term would require the company to beat and raise on the bottom line over the next few quarters,” Heather Bellini wrote to Goldman clients. “Given our lower operating forecasts for 2012, we see this scenario as unlikely.”
Amazon is set to end the year off 4 per cent, with investors showing signs of nerves over the strategy of Jeff Bezos, Amazon’s founder and chief executive, to drive sales by heavy investment in new products.
With one day of trading left in 2011, the consumer discretionary sector of the S&P 500 is set to end the year up 5 per cent, the best performance apart from defensive utility and consumer staple stocks. That has been driven by robust US consumer spending, even as worries about global growth have resurfaced, but analysts are questioning whether the outperformance can continue.
The holiday season has been characterised by heavy discounting and high volumes of internet purchases by price-conscious shoppers. The latest quarterly results season saw several star retail stocks report falling or stalling margins.
Consumer electronics chain Best Buy fell 15.5 per cent on December 13, after profits fell, despite an increase in revenue, because of lower margins. And on December 22 Bed, Bath and Beyond, tumbled 6.3 per cent in a rising market, as it broke a long run of margin growth.
“This lower gross margin, we believe, will be a trend across retail as the cost of sales increases, and the internet, a lower margin sales channel, continues to hurt margins,” said David Strasser, retail analyst at Janney.
Analysts also question whether retail spending can continue to outpace economic growth. The personal savings rate fell steadily over the year to 3.3 per cent in September, the lowest level since 2007, suggesting consumers may be cutting back on savings to fund spending.
The holiday season has also seen signs of cracks in the emerging market-driven growth story that has seen luxury retailers trade at a premium this year. Tiffany was heavily penalised by investors at the end of November when it forecast “weakness” in sales in western European and north-eastern US.
“No matter how good the performance in Asia, mature markets still matter,” said David Schick, retail analyst at Stifel Nicolaus. “We’re starting to see weakness in financial markets impacting on high end consumer spending.”
{ 4 comments… read them below or add one }
Nationalizing the Banks, discussed here :
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7766
The sub-prime crisis is also not over, nor will the home value situation be resolved via the mechanisms in place in the USA right now.
More time will be needed under the current plan.
My opinion is the FED should be merged by an act of congress back into US Treasury – paying the FED its contractor fee is obsolete in the computer real time reporting world we live within – we are being raped. The Fed made 78 billion in profit last quarter alone – thats PROFITS the total Apple has over a decade of accumulation – in one quarter – we owe the Fed 7 Trillion – time to cut the interest fee cord and merge them into treasury. Common damn sense.
I agree with the elimination of the FED, the problem is merging them with Treasury.
I think a simple sunset clause, they already took their ‘golden handshake’ (more like a tip upside down and shake) in 2008. Tell the Bernanke and crew thanks you your services are no longer required. Department of Treasury and the Congress have always had the power to print money, the shell game of the past century with the FED is what has been the root cause of the pain in the world, on the financial front, today.
The merger lets the good the Fed does continue – without the fee of interest – as a pay for the work they do – we the people must print our money ( now would be good ) without interest cost to a private stock company owned by banks called the FED. The Fed is the most advance criminal scam in world history. In my opinion.