Today's News

By Markos N. Kaminis - Economy & Markets:

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

The day's news was like an interesting mosaic full of colorful sprinklings of economic reports, international happenings, energy market activity, global affairs drivers and corporate events. Read on, as we think you'll enjoy our take on it all. As our schedule settles, we intend to provide you with this report regularly in the pre-market.

Economic Data Analysis

Existing Home Sales - January

Existing Home Sales were reported this morning lower than expected. Sales ran at an annual pace of 4.49 million, versus consensus expectations for 4.8 million. The sales rate was also well below December's pace of 4.74 million.

National Association of Realtors Chief Economist Lawrence Yun clarified why. Mr. Yun noted that with fiscal stimulus hanging in the balance, potential home buyers were well aware of new incentives that would soon be made available to them. For this reason, real estate investors simply held off purchases while waiting for the economic value add.

Despite the headline bad news, however extraordinary it may have been, the report contained a good share of positive real estate market information. For instance, the total level of housing inventory declined in January to a two-year low! So, even though sales weakened, inventory dropped. The level of inventory measured in months, however, is influenced by the most recent rate of sales (which was unnaturally low), so that metric rose slightly to a 9.6 month supply (9.4 in December).

Even better, the NAR believes fiscal stimulus and interest rate incentives will create 900,000 home sales in 2009. Those extra sales that should result from government efforts (and your tax money) are expected to allow inventory to fall to an 8-month supply by the end of the year, which is a level consistent with price stabilization. Woo hoo! Of course, if you've been reading Wall Street Greek's Real Estate Analyst Michael Douville, you already knew that.

Mortgage Applications

Mortgage Applications fell 15.1% last week, according to the Mortgage Bankers Association. After reading the previous paragraphs, you might think the fiscal stimulus wait had something to do with this data as well. However, mortgage refis still dominate the weekly data, making up 69.7% of them last week. Keeping that in mind, we note that mortgage rates had increased about 8 basis points last week, to 5.07% on 30-year fixed rate mortgages. So lower refinancing activity, alongside decreased new purchases, served to suffocate total mortgage demand. Also, despite data adjustment for it, perhaps the President's Day holiday was not completely out of play.

The important information to take from this report is that mortgage rates remain extremely accommodating, and the 4-week moving average was still up 0.4% on a seasonally adjusted basis.

Bernanke Testimony

Federal Reserve Chief Ben Bernanke wrapped up his second day of testimony on Capitol Hill today. The prepared statement matched yesterday's, but today Ron Paul and House committee members got their stab at the Fed boss. We thought Bernanke's clarification yesterday of the bank "stress test" and resolved concerns over bank nationalization were the reasons for equity rise. Specifically, Bernanke said the test would not have a "pass/fail" result. We think that went a long way toward reassuring investors. Today, Bernanke went as far as to say complete bank nationalization was not in his plans, nor the Treasury's. Still, stocks sobered up.

International News

S&P Downgrades Ukraine

A day after doing in Latvia, Standard & Poor's downgraded the Ukraine to junk status. More specifically, the sovereign rating fell to CCC+, seven levels short of investment grade and two levels lower than it was prior to the move. S&P said the country's political turmoil could put its IMF funding resource at risk. The Ukraine is now the lowest rated nation in Europe, which should be concerning enough to the EU. The Ukraine represents a significant distribution channel for natural gas to the region. Therefore, Ukrainian stability and its means of payment (to Russia) should be important enough to the EU for it to push the IMF to squeeze funding through to the Ukraine, despite its recent inability to meet requirements set forth for the money flow. We expect the Ukraine will get its gift, and the credit rating should be restored thereafter.

Japan Exports Drop

Japan's equity market was amazingly unfazed today by news that the nation's exports were down 45.7% in January, versus the year before. The aggregate level of exports hit a 10-year low as demand for Japanese cars and electronics waned on collapsed global spending. Global markets seemed enthused today by the breath of fresh air provided by President Obama last evening. Japan is, however, facing its harshest economic climate since World War II.

Asia:

1. MSCI Asia APEX 50: 1.35%


2. Japan NIKKEI 225: 2.65%


3. Hong Kong Hang Seng: 1.61%


4. China CSI 300: 0.10%


5. India BSE SENSEX 30: 0.91%

Europe:

1. DJ Euro STOXX 50: -0.62%


2. UK FTSE 100: 0.85%


3. France CAC 40: -0.41%


4. Germany DAX: -1.27%

(Index prices are as available at hour of publishing and may not be the closing price)

Commodity Markets

The Energy Information Administration (EIA) published its weekly Petroleum Status Report today at 10:30. The data showed U.S. commercial crude oil stockpiles increased by 0.7 million barrels this week, reversing a short-lived trend of draw (last week: draw of 0.2 million). WTI Crude was up about 6.8% today though, which would be inconsistent with the oil inventory data.

News from Iran may have been behind the rise in oil prices. Iran test fired a Russia/Iranian built nuclear plant today, and though it is not fully operational yet, spent fuel could be used to make nuclear weapons. Also, today the head of Iran's Atomic Energy Organization disputed U.N. claims that Iran had slowed its nuclear work. He said Iran currently had 6K centrifuges in operation and a plan to get to 50K up in five years time.

The U.N. report was still troubling, because it declared that Iran had a stockpile of nuclear fuel that was large enough to make a bomb. Now let's see: Israel bombed Iraq when it was building a plant; and then it bombed Syria recently on a suspected effort. So tell me again why Israel will not bomb Iran soon, a nation that has declared Israel its mortal enemy while also calling for its destruction?

Corporate News Drivers

First Solar

Yesterday we told you to consider alternative energy, including solar stocks. We like alternative energy on two drivers. The first is a pending war involving a critical supplier of oil, Iran. Secondly, President Obama is dedicated to energy independence.

However, First Solar (Nasdaq: FSLR) made that call of ours look bad today, as it fell 21% on company specific weakness. To put it in layman's terms, FSLR has a competitive disadvantage due to declining input costs at its competitors. Other solar companies use a different material for their competing products, and its price is dropping swiftly and deeply. Also, the overall solar market has taken a hit, due to the economic crisis. Nations, utilities, commercial and retail clients have much less money to spend on solar energy investment now. Spain, for instance, was a key solar buyer, but is now not nearly as important in the marketplace.

Solar stocks are reporting earnings these days, so you might wait to get a better entry point for the names you like, if you believe in the idea. Stockpicking is important here, and we noted that yesterday, but the overall group should benefit substantially (the survivors anyway) from both economic recovery and the war event I see ahead of us. Also, the high beta shares of the growth segment should lead the market out of this mess eventually.

Saks

Saks (NYSE: SKS) missed the analysts' consensus loss estimate by a large amount, but its shares rose nonetheless today. Excluding a nonrecurring charge, Saks posted a loss of $0.60 per share for its most critical quarter, ended January 31st. That compared against analyst expectations for a loss of $0.30, according to Thomson Reuters. Sales fell 15%, as the company slashed prices to move inventory in a slow marketplace; this is something a fashion retailer must do, as styles get old from year to year and useless from season to season. Still, SKS shares rose 13% today, as management dispelled bankruptcy rumors, noting the company had enough capital to survive the year. Management also indicated it was focused on preserving capital, and would take actions to secure survival through the rough economy.

Insurance Stocks Hit

Insurance stocks took a hit today on bad news from Ambac (NYSE: ABK). Ambac's shares fell 9.9% after it reported a Q4 loss of $2.34 billion. Ambac has been reducing its risk related to some financial instruments (the usual suspects), and paying for it. MBIA (NYSE: MBI) shares fell 5.8% today in sympathy and Assured Guaranty (NYSE: AGO) was down on its own sad quarterly report.

EPS Schedule

The day's EPS schedule includes Aegean Marine (NYSE: ANW), Ambac (NYSE: ABK), Angeion (Nasdaq: ANGN), Avis Budget (NYSE: CAR), Cadbury plc (NYSE: CBY), Centerpoint Energy (NYSE: CNP), Clean Harbors (NYSE: CLH), Cliff's Natural Resources (NYSE: CLF), CMS Energy (NYSE: CMS), Cogent (Nasdaq: COGT), Dana Holding (NYSE: DAN), Del Monte Foods (NYSE: DLM), Dollar Tree (Nasdaq: DLTR), Donaldson (NYSE: DCI), Eaton Vance (NYSE: EV), El Paso Electric (NYSE: EE), Equity One (NYSE: EQY), Express Scripts (Nasdaq: ESRX), Famous Dave's (Nasdaq: DAVE), FBR Capital (Nasdaq: FBCM), Flowserve (NYSE: FLS), Fluor (NYSE: FLR), General Maritime (NYSE: GMR), Gibraltar Industries (Nasdaq: ROCK), Goodrich Petroleum (NYSE: GDP), Greif Brothers (NYSE: GEF), HealthStream (Nasdaq: HSTM), Hearst-Argyle (NYSE: HTV), Internet Capital Group (Nasdaq: ICGE), Isis Pharma (Nasdaq: ISIS), J.M. Smucker (NYSE: SJM), KBR Inc. (NYSE: KBR), Liberty Media (Nasdaq: LINTA), Limited Brands (NYSE: LTD), Martha Stewart (NYSE: MSO), Medarex (Nasdaq: MEDX), NetEase (Nasdaq: NTES), Nicor (NYSE: GAS), Petrohawk (NYSE: HK), Psychiatric Solutions (Nasdaq: PSYS), Quality Distribution (Nasdaq: QLTY), Saks (NYSE: SKS), Salesforce.com (NYSE: CRM), Service Corp. (NYSE: SCI), The TJX Cos. (NYSE: TJX), The Washington Post (NYSE: WPO), Toronto Dominion Bank (NYSE: TD), True Religion Apparel (Nasdaq: TRLG), Tween Brands (NYSE: TWB), United Rentals (NYSE: URI), Visteon (NYSE: VC), Zale (NYSE: ZLC) and more.


(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK). Please see our disclosures at the Wall Street Greek website and author bio pages found there.