Auto Sales for May 2010 & More

Today's Coffee

The day's data included reports on announced corporate layoffs, pending home sales, weekly mortgage activity, weekly same-store sales and of course auto sales. Meanwhile, Warren Buffet appeared before Congressional panel regarding the credit rating agencies.

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Auto Sales for May 2010 & More

We covered the Challenger, Gray & Christmas Job-Cuts and Pending Home Sales Reports earlier this morning. Please click through the links here to read our analysis of those reports at the blog. Whenever we publish multiple reports during the day, excluding the pre-market report (which is on its way back), we will email you only once with links available for your click through to the other reports.

Auto Sales May 2010

Automakers reported motor vehicle sales for the month of May today. April's auto sales had drifted lower due to a pulling effect into March, when automakers employed major incentive programs. Toyota's (NYSE: TM) March woes had every automaker fighting aggressively for market share back then.

May auto sales show an increase over April, but it does not appear like it will be significant when the final tally is in. GM estimates that overall US sales for all automakers increased to an annualized rate of 11.4 million vehicles in May, versus 11.2 million in April. The big winners this month look to be Hyundai Motor (OTC: HYMTF.PK) with sales up 33% over last year's month; Chrysler +33%; Ford (NYSE: F) +22%; Nissan (Nasdaq: NSANY) +24%; General Motors +17%; and Honda Motors (NYSE: HMC) +19.1%. Toyota (NYSE: TM), struggling to maintain market share, grew sales by only 6.7%. General Motors managed to maintain market share despite shedding several brands, a very impressive feat as the company looks toward an IPO.

Weekly Mortgage Activity

Weekly mortgage application data does not offer the same message provided by today's Pending Home Sales report, which we covered earlier today. For the week ended May 28, the Market Composite Index of mortgage volume increased just 0.9%. All of the week's positive news came from refinancing activity, where the Refinance Index improved 2.4%. Average contracted rates for fixed rate mortgages of 30-year and 15-years in duration stuck low at 4.83% (prior 4.8%) and 4.24% (4.25%), respectively. Refinance activity now represents 73.8% of total activity, up from 72.2% just one week earlier.

The real story is found in mortgage activity around home purchases (both new and existing). Here, the MBA's Purchase Index reveals trouble, as it fell 4.1% last week. In fact, the Purchase Index is near 40% below its level of four weeks ago, when the expiring First-Time Homebuyers Tax Credit incentive was driving real estate demand. We noted in today's "Pending Home Sales" article that cheap interest rates and stabilized home prices on low housing inventory do not necessarily translate into real estate demand in a 9.9% unemployment environment. Neither are home prices really stabilized in such an environment.

ICSC Weekly Same-Store Sales

The International Council of Shopping Centers (ICSC) reported on the period ended May 29. Same-store sales had been noticeably weaker over recent weeks, a very concerning trend. However, it should not be that surprising, given the fact that we are moving forward toward tougher comparable sales figures. Recall that last spring was perhaps the harshest operating environment in a generation.

This latest figures showed more of the same dull data. Sales improved 0.6% over the immediately preceding week, which had declined 0.8% from the week before. Sales improved just 2.5% over the prior year level of activity, but that compared against last week's 1.3% gain. At least we can take comfort in the fact that the sales growth rate did not deteriorate further in this latest check. Nicer weather should provide a bit of a boost moving forward as well, but harder comps should still weigh on year-over-year comparisons moving forward (given still high unemployment).

DC Market Drivers

Warren Buffet was invited to Washington DC today, where he testifies before the Financial Crisis Inquiry Commission on the role of ratings agencies in the market and economic meltdown. Warren is an owner of Moody's (NYSE: MCO) shares, but he's an honest guy, and while under oath you can expect him to talk about the flaws in the ratings process. We have been very critical of the rating agencies here, as we view them as a key catalyst in the global financial crisis. Had they rated the mortgage derivatives they were charged to rate properly with less than investment grade ratings, those securities markets would never have grown to their bubblistic marks. This critical error (in my opinion) by the rating agencies, including Standard & Poor's (NYSE: MHP), should be better understood by the general populace so that a due amount of political pressure might spur Congress to act appropriately and harshly against these firms.

Corporate News Drivers

Drug company CEOs are addressing investors at a Sanford Bernstein conference. The FDA is reviewing MedImmune's respiratory-tract treatment. Zumiez (Nasdaq: ZUMZ) and Hot Topic (Nasdaq: HOTT) reported May sales today. Acxiom (Nasdaq: ACXM) and McDermott Int'l (NYSE: MDR) are meeting with investors. IPO lockup restrictions expire on Conexant Systems (Nasdaq: CNXT), Diamond Foods (Nasdaq: DMND) and Wintrust Financial (Nasdaq: WTFC).

The day's earnings schedule includes ABM Industries (NYSE: ABM), Applied Signal Technology (Nasdaq: APSG), Calavo Growers (Nasdaq: CVGW), China Nuokang (Nasdaq: NKBP), Coldwater Creek (Nasdaq: CWTR), Copart (Nasdaq: CPRT), Cyberonics (Nasdaq: CYBX), Daktronics (Nasdaq: DAKT), Dynamex (Nasdaq: DDMX), Greif Inc. (NYSE: GEF), Hovnanian Enterprises (NYSE: HOV), Hurray Holding (Nasdaq: HRAY), Isle of Capris Casinos (Nasdaq: ISLE), Jos A. Banks (Nasdaq: JOSB), Layne Christensen (Nasdaq: LAYN), Lukoil (OTC: LUKOY.PK), Medical Action Industries (Nasdaq: MDCI), RBC Bearings (Nasdaq: ROLL), Shanda Interactive (Nasdaq: SNDA), Shoe Carnival (Nasdaq: SCVL), The Descartes Systems (Nasdaq: DSGX), United Natural Foods (Nasdaq: UNFI), Village Supermarket (OTC: VLGEA) and Vision-Sciences (Nasdaq: VSCI). Relevant Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: ICE, Nasdaq: NDAQ.



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