‘Ho-Hum’ Bernanke Statement in Works? No Place Like Housing
Recapping the day's news and newsmakers through the lens of CNBC.
Taper Survey Says?
The taper will start in December, rather than February, a survey of 60 economists and strategists by CNBC has found. They anticipate that quantitative easing will end around this time next year and an interest rate hike should come in the second quarter of 2015. Most still think they'll be some quantitative easing well into 2014, to the tune of about $367 billion. They also believe that the impact QE has had in lowering mortgage rates and bond yields—and raising stock prices—has diminished.
The markets eagerly await Fed Chairman Ben Bernanke's policy statement at 2 p.m. Wednesday. Survey respondents said Fed policy has been a bit unclear lately so there was plenty of speculation as to what would happen. Tuesday's market gains would suggest that Bernanke will stay the course for at least a little while longer.
"I think the idea of tapering being sooner rather than later is something Bernanke is likely to confirm in his press conference tomorrow."—CNBC's Steve Liesman
"What the Fed has attempted to do over the past few years is suppress interest rate volatility and push investors ever outward along the risk spectrum. You could call Mr. Bernanke 'Mr. Volatility Suppressor.' It will probably want to deliver a ho-hum policy statement on the economy."—Pimco's Tony Crescenzi
Housing's Slow, Steady Progress
Housing starts were up less than expected in May (but probably for the right reasons) and consumer prices were up, pointing to stability after a protracted decline.
Housing starts rose 6.8 percent according to the Commerce Department, after falling by 14.8 percent in April. Multifamily starts were way up; single-family starts were flat. Permits fell, but April's number was very lofty. The starts could be a bit muted by labor and/or materials constraints, and possibly foul weather. So all signs point to strengthening, but inventory still remains too low for critical mass.
The story is similar with consumer prices; the rise last month stopped a long slide but there's still work to be done. The Fed would like to see stronger inflation—a good proxy for a strengthening economy.
"All of this speaks to […] Bernanke. I now agree he'll probably want to start tapering in the fourth quarter if by then it's clear he's not going to be reappointed. But it's going to be a slow dial back […] starting in October. By this time next year QE will probably be over. The economy is still healing."—Stu Hoffman, economist with PNC Bank
"It's a seasonably slower period for the builders. Rate concerns are going to persist. When we get to back of the year, the stocks will do well. Pricing has been great for the builders and there's margin expansion in the back half of the year. It's just going to be a rocky couple of months so we think you buy the dips here and wait for opportunities to take advantage of the move up in margins and profits as we go forward."—David Goldberg of UBS
I-Spy Foiled 50 Plots
The government's Internet spying program, Prism, controversially brought to light by former Booz Allen Hamilton techie Edward Snowden, apparently got wind of and foiled nascent plans to bomb the New York Stock Exchange and New York's subway system. That's not all, either; apparently the program has had a hand in foiling more than 50 potential terrorist attacks since 9/11.
"My reaction is that's the way it should work, and thank God it worked in that case. It's critically important for the intelligence community to be monitoring certain communications outside the United States and the question that's talked about now is how do you handle the inside-the-United States part of it? In this case, it gave them a number they could act on and good job FBI."—James Kallstrom, former assistant FBI director
Dell in a Pickle?
Dell's plans to go private by leveraging its balance sheet is causing a stir among investors who think the move is either poorly timed or simply unwise. For one, the PC maker is facing tightening margins and tougher competition from a reinvigorated Hewlett-Packard. And activist investor Carl Icahn is leading a competing bid against founder Michael Dell and Silver Lake Partners, questioning why shareholders aren't being allowed to vote on the company's options.
"It's an interesting construct here for all investors because there is still a belief in some ways that if you could lever the company for a private transaction, why can't you simply lever the company, that is, add debt, for our benefit. Pay us a huge dividend as a result. That is the Icahn plan."—CNBC's David Faber
—By Doug Cubberley, Special to CNBC.com.