Today’s Market Highlights

  • U.S. Home Sales Post Surprise June Decline.  Sales of newly-constructed homes declined by 8.4% in June to an annualized rate of 350,000, missing the consensus forecast for 372,000.  The decline was led by a 60% record high sales plunge in the northeast region. Moderating the disappointment somewhat, the Commerce Department’s originally reported May total of 369,000 was upwardly revised to 382,000, while March and April were also revised higher.  The supply of new houses on the market at the current sales pace increased to 4.9 months’ worth from a near seven-year low of 4.5 months in May.  The median new home selling price decreased by 3.2% year-over-year to $232,600.  Today’s report, along with the unexpected decline of existing home sales in June to an eight-month low, confirms that the housing market recovery will be uneven. 


  • Federal Reserve Preparing to Act?  As mentioned, the WSJ reported late yesterday afternoon that FOMC policy makers have become impatient with sluggish U.S. growth and high unemployment and have moved closer to taking decisive action to spur growth.  The central bank may announce new quantitative easing measures as early as next week’s FOMC meeting, though they may wait until September for more circumspect economic information.


  • EU Finance Ministers Seek Quick Action on Spain.  Luxembourg Finance Minister Luc Frieden said the euro-region is “ready to act” to backstop Spain as that nation’s borrowing costs soar. Organisation for Economic Cooperation and Development (OECD) Secretary General Angel Gurria said quick action by Europe’s central bank for large scale buying of Spanish debt could avert a full-blown Spain bailout.  The yield on Spain’s 10-year debt moderated from a morning high of 7.625% to the current level of 7.41%.  Meanwhile, an ECB official suggested that a banking license should be granted to Europe’s permanent bailout fund, the European Stability Mechanism (ESM) so as to be eligible for ECB direct lending. Separately, Greece’s new Prime Minister Antonis Samaras described his nation as being in a “Great Depression,” similar to the U.S. economic woe experienced in the 1930s.


  • Second Quarter Earnings Scorecard.  Around 71% of the 193 companies within the S&P 500 Index that have reported quarterly results so far this quarter have topped analysts’ forecasts. Boeing’s (BA) net income rose to $967 million or $1.27, topping EPS estimates for $1.13, and it boosted its full-year 2012 profit outlook for the second time this year. Caterpillar (CAT) posted record-setting 2Q EPS of $2.54, beating Wall Street estimates for $2.28 per share. With profit up 67% YoY, CAT raised its 2012 earnings outlook by a dime to $9.60 per share. Apple (AAPL) posted F3Q EPS of $9.32, widely missing consensus estimates by $1.04 per share.  While revenue of $35B was up 22% YoY, sales missed estimates by $2.5B.


  • Sector Performance:  At press time, seven of the ten S&P 500 sector groups are underwater, led by losses in Technology (-0.8%), Energy (-0.5%) and Utilities (-0.4%).  Telecom (+0.8%) reversed off yesterday’s slump, while Financials (+0.1%) and Consumer Staples (+0.01%) hold onto fractional gains. Crane Co (CR) and Lindsay Manufacturing (LNN) both raised their quarterly dividends.


  • This Week’s Remaining Economic Calendar:  Thursday:  Durable Goods Orders (0.6% forecast, 1.1% prior), Weekly Jobless Claims (380K forecast, 386K prior), Pending Home Sales (0.9% forecast, 5.9% prior), Kansas City Fed Manufacturing Index (4 forecast, 3 prior), Fed Balance Sheet Data; Friday:  U.S. 2Q GDP Data (1.2% forecast, 1.9% prior), University of Michigan Consumer Sentiment Index (72.0 forecast and prior).

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