Friday, January 21, 2011
Home sales hit 13-year low; slow recovery ahead
The number of people who bought previously owned homes last year fell to the lowest level in 13 years, and economists say it will be years before the housing market fully recovers. High unemployment and a record number of foreclosures are deterring potential buyers who fear home prices haven't reached the bottom. Job growth is expected to pick up this year, but not enough to raise home sales to healthier levels.
"We built too many houses during the boom, and now after the crash, it will take us a long time to get back to normal," said David Wyss, chief economist at Standard & Poor's in New York.
The National Association of Realtors reported Thursday that sales dropped 4.8 percent to 4.91 million units in 2010. That was slightly fewer than in 2008, which had been the weakest year since 1997.
The poor year for sales did end on a stronger note. Buyers snapped up homes at a seasonally adjusted annual rate of 5.28 million units in December, the best sales pace since May and the 12.8 percent rise from November was the biggest one-month surge in 11 years. (more)
Natural Gas Closes at Five-Month High on Bigger-Than-Forecast Supply Drop
Natural gas futures rose to the highest price in more than five months after a government report showed that U.S. inventories fell more than forecast last week as cold weather boosted demand for the heating fuel. Gas gained 2.9 percent after the Energy Department said supplies dropped 243 billion cubic feet in the week ended Jan. 14 to 2.716 trillion. A survey of Bloomberg users released five minutes before the report showed an expected drop of 234 billion. Temperatures last week were below normal in the East and Midwest, according to the National Weather Service.
“The storage withdrawal is respectable and the market seems to like it so far,” said Martin King, an analyst at FirstEnergy Capital Corp. in Calgary.
Natural gas for February delivery advanced 13.4 cents to $4.695 per million British thermal on the New York Mercantile Exchange, the highest settlement price since Aug. 4.
Gas was trading at $4.56 before the report was released at 10:30 a.m. in Washington. The futures have declined 15 percent from a year ago. (more)
3 Stock Bargains Based on Assets: ADM,ED, SJM
Thirty years ago the typical U.S. stock sold for less than a 20% premium to its "book value" – or what the company's accountants say its factories, machines, patents and other assets are worth. Today the typical stock sells for a premium of more than 150% to its book value.
Part of that difference is surely explained by the rise of the information economy. Companies like Google ( GOOG: 626.77, -4.98, -0.78% ) and eBay ( EBAY: 30.78, +1.68, +5.77% ) turn ideas into profits using only a sprinkling of physical assets. But it may also be due to over-pricing by investors. And stocks with low share prices relative to their book values tend to produce higher returns than those with high price-to-book ratios, all else held equal. That phenomenon has been documented since the early 1990s and as recently as 2006.
One theory on why stocks with low price-to-book ratios tend to outperform has to do with the tendency of investors to extrapolate past events too far into the future. Highly profitable firms tend to be awarded high price-to-book ratios, but also tend to attract a rush of competition that can crimp future earnings. Companies with modest price-to-book ratios, meanwhile, lend themselves well to the sort of efficiency efforts that can improve future returns. (more)
Stocks end down after sell triggers activate
U.S. stocks closed slightly lower Thursday, after investors used worries about China’s fast growth rate to extend the first significant market pullback since November.
“Is it the real correction? Yes, we’re here. We are seeing selling on the news, and good earnings that still result in downward pressure,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,823, -2.49, -0.02%) closed down 2.49 points, or 0.02%, to 11,822.80, led by a 2% drop in the shares of Caterpillar, Inc. /quotes/comstock/13*!cat/quotes/nls/cat (CAT 93.70, +0.09, +0.10%)
The S&P 500 Index /quotes/comstock/21z!i1:in\x (SPX 1,280, -1.66, -0.13%) closed down 1.66 points, or 0.1%, to 1,280.26, with natural-resource and energy companies hit hardest, and with defensive sectors, specifically consumer staples and utilities, faring best. On Wednesday, the index posted its largest percentage decline since November.
The Nasdaq Composite Index /quotes/comstock/10y!i:comp (COMP 2,704, -21.07, -0.77%) shed 21.07 points, or 0.8%, to 2,704.29.
For every five stocks climbing, nine fell on the New York Stock Exchange, where nearly 1.2 billion shares traded hands. (more)
Thursday, January 20, 2011
Why supermarket stocks are getting squeezed
Orange juice isn't the only thing at your supermarket that's been squeezed.Rising food prices mean grocery store chains must absorb extra costs on items like meat, seafood, and produce, or they try to pass them along to customers. But many of those consumers are unemployed or have less money to spend, even on essentials. For now, the big chains are mostly choosing to absorb. As a result, profits are falling, and so are their stocks, making them one of the few dim lights in the market in 2011.
On Tuesday, Supervalu was the first of the grocers to report quarterly results, and the numbers for its fiscal third quarter were ominous: A loss of $202 million, or 95 cents a share, compared with a profit of $109 million, or 51 cents, in the same period a year earlier. The company, which operates Albertsons, Jewel-Osco, Acme and other chains, also cut its forecast for the year.
"This is going to be a challenging year going forward to manage inflation," Supervalu CEO Craig Herkert told analysts Tuesday. "It's just a fact and we believe these inflationary measures are going to impact consumers."
The result: "Investing in (grocers) now is certainly not for the faint of heart," says Philip Gorham, an analyst at Morningstar. (more)
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