Today's Market Moving News - No Time to Buy
(Stocks in article: NYSE: SLM, NYSE: BSC, NYSE: MCO, NYSE: MHP, NYSE: KBH, NYSE: LEN, NYSE: DHI, NYSE: HOV, NYSE: TOL, NYSE: BA, LSE: BAY.L, NYSE: RAD, Nasdaq: PTRY, Nasdaq: CHTT, NYSE: MTN)
Mixed news and data have the market in flux today, though up modestly. We say mixed data, but the flow clearly has a negative bias to it. August new home sales fell off a cliff, and there seems to be a lot of cliff diving going on lately, from the Employment Situation Report to durable goods orders to home sales. New home purchases declined 8.3% in August, to an annual pace of 795,000. Economists surveyed by Bloomberg were looking for 825,000. We alluded to this likelihood in our weekly market-moving event planner, "The Greek's Week Ahead - The Dollar and the Shadow." The bad housing news didn't end with sales, as the Commerce Department reported the median price of a home dropped 7.5% since last year.
Shares in the beaten down housing group were mixed on the news, with KB Homes (NYSE: KBH), D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN) down on the day, while Toll Brothers (NYSE: TOL) and Hovnanian (NYSE: HOV) moved higher. KB Homes reported earnings today, posting a loss versus a prior year gain, and warning about ongoing troubles in 2008. Recent foreclosure data has been foreboding, and though bankers are working with troubled borrowers facing resets of variable rate loans, it's yet unclear how much the Fed can do. After the Fed cut rates last week, long rates moved higher, meaning fixed mortgages didn't get any cheaper, while variable rate improvements could help. Still, the Fed looks handcuffed with overseas central banks still seemingly geared to contain expansion. As a result, as the Fed cuts, the dollar weakens, which could in turn help give birth to higher inflation if treasuries must be sold at higher yields to retain foreign investors.
Let's get all the bad news out of the way before we move to the short list of good stuff, shall we?... In a move ominous for deal flow, J.C. Flowers wants a better agreement or out of its current contract with SLM (NYSE: SLM). Great timing, considering KKR is trying to unload $10 billion of First Data loans to the market today.
Weekly initial unemployment claims surprised on the soft side, as last week's data showed new claims for benefits at 298,000, versus the economists' consensus view for 320,000. Not bad, but recent data and economists' views, not the mention the Wall Street Greek's outlook, still indicate unemployment will increase in the months ahead.
In one of today's articles below, CNBC reported that Q3 EPS growth is anticipated to be pathetic (4.4% and 2.1%), but estimate aggregators like Thomson Financial and Standard & Poor's, which uses its own analysts numbers as a first source, are expecting recovery in the fourth quarter. From experience, we disagree. While employed as an analyst, we noted that the majority of earnings estimates even one quarter out were often far from updated or reflective of the likelihood of change, especially at a firm we knew well. Estimate changes in fact, typically consistently lagged reality. Based on this discovery, we believe S&P's forecast for 10.8% growth in Q4 will very likely look significantly less optimistic after Q3 has passed and analysts have updated their models, in one experienced analyst's view.
Mixed news and data have the market in flux today, though up modestly. We say mixed data, but the flow clearly has a negative bias to it. August new home sales fell off a cliff, and there seems to be a lot of cliff diving going on lately, from the Employment Situation Report to durable goods orders to home sales. New home purchases declined 8.3% in August, to an annual pace of 795,000. Economists surveyed by Bloomberg were looking for 825,000. We alluded to this likelihood in our weekly market-moving event planner, "The Greek's Week Ahead - The Dollar and the Shadow." The bad housing news didn't end with sales, as the Commerce Department reported the median price of a home dropped 7.5% since last year.
Shares in the beaten down housing group were mixed on the news, with KB Homes (NYSE: KBH), D.R. Horton (NYSE: DHI) and Lennar (NYSE: LEN) down on the day, while Toll Brothers (NYSE: TOL) and Hovnanian (NYSE: HOV) moved higher. KB Homes reported earnings today, posting a loss versus a prior year gain, and warning about ongoing troubles in 2008. Recent foreclosure data has been foreboding, and though bankers are working with troubled borrowers facing resets of variable rate loans, it's yet unclear how much the Fed can do. After the Fed cut rates last week, long rates moved higher, meaning fixed mortgages didn't get any cheaper, while variable rate improvements could help. Still, the Fed looks handcuffed with overseas central banks still seemingly geared to contain expansion. As a result, as the Fed cuts, the dollar weakens, which could in turn help give birth to higher inflation if treasuries must be sold at higher yields to retain foreign investors.
Let's get all the bad news out of the way before we move to the short list of good stuff, shall we?... In a move ominous for deal flow, J.C. Flowers wants a better agreement or out of its current contract with SLM (NYSE: SLM). Great timing, considering KKR is trying to unload $10 billion of First Data loans to the market today.
Weekly initial unemployment claims surprised on the soft side, as last week's data showed new claims for benefits at 298,000, versus the economists' consensus view for 320,000. Not bad, but recent data and economists' views, not the mention the Wall Street Greek's outlook, still indicate unemployment will increase in the months ahead.
In one of today's articles below, CNBC reported that Q3 EPS growth is anticipated to be pathetic (4.4% and 2.1%), but estimate aggregators like Thomson Financial and Standard & Poor's, which uses its own analysts numbers as a first source, are expecting recovery in the fourth quarter. From experience, we disagree. While employed as an analyst, we noted that the majority of earnings estimates even one quarter out were often far from updated or reflective of the likelihood of change, especially at a firm we knew well. Estimate changes in fact, typically consistently lagged reality. Based on this discovery, we believe S&P's forecast for 10.8% growth in Q4 will very likely look significantly less optimistic after Q3 has passed and analysts have updated their models, in one experienced analyst's view.
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posted by The Greek | 1:30 PM
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