Today's Market: Home Prices, G-20, Korea, GM, F, LEN, GOOG, CAT
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Today's Market Moving News
This Tuesday brought a colorful palate of appetizers to sooth a news junkie's hunger. Today saw the auto industry scrambling to pick up the pieces that the Obama Administration broke and scattered yesterday. The day also brought some anticipated negative news flow from economic data, but also one uplifting bit of retail sales data. Finally, things are getting dangerous everywhere, including both the streets of London and the Sea of Japan. Enjoy our summary, offering a tasting of it all below.
S&P Case Shiller Home Price Index
Two months too late, but a news breaker nonetheless today... Home prices fell again in January, as reported by the Case Shiller metric. The group compiles quarterly data on national price trends, and offers monthly reports on 10-city and 20-city composites. 13 of the 20 metro areas measured in January showed record level annual rates of price decline. More specifically, the 10-metro area composite noted 19.4% price decline, while the 20-city metric posted a 19% price drop. Still, a 30 thousand foot look-see of the graph of decline seems to offer insight into a leveling of price just beginning. In other words, prices seem to be declining at a slower rate, while still declining, and that is going to eventually lead to price stabilization and rise. Because this metric is two months behind, we can't be sure what is occurring now, but we wouldn't bet on anything different just yet. More current data is available from other reports, and so we'll keep you informed.
ICSC Weekly Same-Store Sales Report
Sunny day! We told you the weather matters! As the flowers bloom and the days warm, retail sales seem sure to find seasonal benefit. That's not to mention the coming of the Easter holiday. For the week ended March 28 (Sat.), same-store sales rose 1.1% versus the week just prior, and fell just 0.2% year-to-year. We would be remiss not to remind that unemployment continues to increase, so we fight a significant headwind on the longer term trend, which is naturally seasonally adjusted.
Conference Board's Consumer Confidence Measure
Consumer confidence still stinks, but it inched slightly higher this month. The Conference Board's take on this important barometer showed the index moved up to 26.0, from 25.3 in February. Before you throw a party, let me remind you that we still sit at historic lows on most measures of confidence. Improvement here is a necessity for sustainable consumer spending. Also, the economists' consensus for this month's report was 28.0, a bit above the reported figure.
The "Present Situation Index" fell slightly, but was more than offset by an increase in the "Expectations Index." Both these measures are undoubtedly important, but expectations clearly carry more weight for investors. When both metrics are on a steady rise, we'll have an environment of improving confidence worth buying into. Still, as long as people think the current situation is horrible, they can always reset their "expectations" if things drag on badly.
NAPM-Chicago Purchasing Managers Index
We've noted several times that data out of the Philadelphia and New York regions was mixed this month, but NAPM's Chicago area measure swayed the balance to the bad. The Business Barometer Index fell to 31.4 in March, from 34.2 in February. The consensus expectation was for a read of 35, which would have been indicative of slight improvement. Let's face it, the manufacturing sector is still consolidating (below 50), and these minor changes in the rate of decline remain insignificant. However, rate of change matters almost as much as directional change, in my humble opinion, so it is worth paying attention to. Today's data is a negative for the market, but not going to prove a driver of broader shares. It's informing us that the pathetic environment we've now grown use to is persisting.
Even so, the Midwest is greatly sensitive to auto and auto-tied businesses, and with General Motors (NYSE: GM) and Chrysler now teetering ever more closely to bankruptcy, concern is surely rising at auto suppliers and dealers. You can expect this sentiment measure to stay sour until and if clarity reaches the GM situation. And even then, it'll have to be a clarity that includes an outlook for auto supplier and dealer support.
International Market News & Commodities
G-20 Gets Ugly
Today in London, the previously docile crowd started turning ugly. In fact, the Bank of England was evacuated due to a bomb threat. This protest at the G-20 is only a small sample of an expanding feeling of frustration and anger among the poor and struggling worldwide. By the way, this is a group whose numbers are increasing with every new weekly jobless tally. Global unrest is a serious problem the world's governments face as the weather warms and unemployed folks get up off the couch to go set fire to some rich guy's BMW. This has already begun, and was plainly seen when the home of the former chief of RBS was attacked last week. AIG (NYSE: AIG) CEO Edward Liddy would not offer the names of his executive staff receiving bonuses for the sake of their safety. Most of those folks wisely returned the bonuses after New York District Attorney Cuomo said he would not publish the names of executives who did so.
Governments are shaking with concern as well. President Obama's firing of GM's CEO yesterday and France's warning this morning that it might walk out of the G-20 were both geared to appeasing their citizenry. Unrest is a real possibility this summer all over the world, even here in the USA. We sit on a powder keg.
Korea's War Threat
We may stand at the brink of war, and most of us do not even realize it. Japan's notice to Korea that it would shoot down any threatening rocket launch over its territory was met by a dangerous Korean response. North Korea threatened war if Japan does so. Such a war has the potential of massive fallout and expansion. North Korea has developed nuclear weapon capable fuel, and the country has at least the capability of setting off a very messy nuclear weapon. With a paranoid, homicidal maniac leading the show, Korea represents a powder keg, and so threats like this can never be overlooked. Within a day, the North and South could be engaged in a massacre of a battle, and Japanese casualties would draw support of the United States. From that point, there is no limit to imagination.
Corporate News Drivers
GM and Ford Scramble
President Obama's actions yesterday may have been the right steps to take, but they left a mess behind that General Motors (NYSE: GM) desperately sought to clean up this morning. Opportunistic Ford (NYSE: F) recognized the opportunity and preempted GM, with its own action of the same characteristic.
Early this morning, Ford (F) announced it would cover the car payments (up to $700/mos.) of any new car buyer who later loses his job. Ford's news, however, came on the heels of the concerning developments at GM and Chrysler. If anybody needed to reassure car buyers this morning, it was General Motors. Ford is like a shark that smells fresh blood and is going in for the kill.
General Motors offered similar incentives; let's face it, they had to. Losing market share only compounds the pressure on GM, as it tries to manage costs. GM also held a press conference meant to reassure car buyers and investors, an attempt to keep money from leaving both the car lot and the equity ranks. We are working on an article focused on this topic, so please look for that at the site later.
Lennar Loss Widens
Lennar (NYSE: LEN) shares are down about 15% today, after the company reported a wide loss. LEN's fiscal first quarter loss expanded 77%, impacted by land and inventory write-off as it adjusts to a significantly impaired pricing environment. Even so, Lennar posted stronger revenues than were expected, by about $63 million, but those sales were lifted by aggressive incentive offering. Still, LEN has no debt on its credit line and cash of $1.1 billion, so it would appear poised to be a rising survivor when recovery begins. However, it bears some risk through numerous joint ventures, and it is actively working toward mitigating that. With those concerns in mind, and the fact that its backlog is near half what it was a year ago (and the aforementioned price data), we can understand why LEN and other homebuilders are lower today. K.B. Home (NYSE: KBH) is off by 5%.
Google Launching Venture Fund
Google (Nasdaq: GOOG) announced it would launch a $100 million venture fund with a purpose to acquire early-stage start up companies. The fund will be wholly owned by Google, though managed as a separate entity. Google Ventures' investment portfolio will not be limited to Internet focused firms.
French Caterpillar Employees Seize Control
Workers at a Caterpillar (NYSE: CAT) plant in France detained managers, as they sought better terms on severance packages. The report goes that the managers were not allowed to leave their offices, and representatives of the union called the tactic innocent "pressure." This marked the fourth such incident in France, including several other companies (3M being one of them (NYSE: MMM). Seems folks are getting tired of being pushed around, and the rules of the game are really changing...
Janney Montgomery Scott hosts a water industry confab in New York. The EPS Schedule highlights news from Aluminum Corp. of China (ACH), American Caresource (ANCI), American Defense Systems (EAG), Apollo Group (APOL), Astea Int'l (ATEA), Banks.com (BNX), Borders Group (BGP), China Direct (CDII), China National Offshore (CEO), China Sky One Medical (CSKI), Corriente Resources (ETQ), Craft Brewers Alliance (HOOK), Cyclacel Pharmaceuticals (CYCC), deCODE Genetics (DCGN), Document Security Systems (DMC), Edap TMS (EDAP), Exfo Electro-Optical (EXFO), FirstCity Financial (FCFC), FSI Int'l (FSII), Fusion Telecomm (FSN), G-III Apparel (GIII), Gentium (GENT), GigaMedia (GIGM), Goldleaf Financial Solutions (GFSI), H.B. Fuller Co. (FUL), Hana Biosciences (HNAB), Heely's (HLYS), Huaneng Power (HNP), Hythiam (HYTM), Imperial Industries (IPII), Kowabunga (KOW), Lennar (LEN), Lifeway Foods (LWAY), Medis Technologies (MDTL), MIVA, Inc. (MIVA), NN Inc. (NNBR), Northern Dynasty Minerals (NAK), Novavax (NVAX), Petro Resources (PRC), Physicians Formula (FACE), Pressure BioSciences (PBIO), Russ Berrie (RUS), Saba Software (SABA), Saga Communications (SGA), Sealy (ZZ), Sonic Automotive (SAH), Spire (SPIR), Steelcase (SCS), Stonemor Partners (STON), Sypris Solutions (SYPR), TAM S.A. (TAM), Targeted Genetics (TGEN), Team (TISI), Technology Research (TRCI), Telkonet (TKO), TLC Vision (TLCV), ULURU (ULU), WidePoint (WYY) and Willdan Group (WLDN).
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