Housing Starts Surge, but Don't Trade the Headline
April housing starts, at 717,000, were well above expectations and at the highest level since October 2008; March was revised upward as well.
Ugh! It was ugly overnight in Asia — Hong Kong and South Korea down 3 percent, Shanghai down 1.2 percent. Commoditieswere down across the board.
Yet Europe has been rallying for several hours, as has the U.S. Spain and Italian bond yields are lower, stocks higher. Looks like there has been some profit taking in the fixed income space on the recent rallies.
Don't kid yourself: the market is still on notice. Any headline could reverse things...quickly.
1) Speaking of commodities declining — the talk this morning was of BHP Billiton backing away from its capital spending projections. They had been planning to spend $80 billion over five years. No more. The commodity price decline in the past few months has taken its toll.
Cash inflows are down, capital costs are up.
They are going ahead with projects already committed to for this year and next, but it appears that some major projects that were in the works may not happen. We are talking about major projects for development of iron ore and copper, for example.
Still, the company remains bullish on iron ore and copper.
2)GE Capital finally pays a dividend! Suspended in 2009, but it's back. $475 million payable to its parent GE in the second quarter 2012. And keep it coming: for 2012, they are planning to pay out 30 percent of GECC's total 2012 earnings. And it gets better: a planned "special" $4.5 billion dividend in 2012. And GE is planning to accelerate share repurchases, starting in the second quarter.
This is important. First, the announcement came earlier than expected. More importantly: regulators would not have approved capital distributions if they were worried about the health of GE Capital.
Bottom line: the GE dividend — now at a generous 3.7 percent yield — is going up. Some think 10 percent or more.
3) Retailers beat on earnings, give mixed guidance after JC Penney misses big
Chico’s shares rise 4.0 percent premarket after the women’s clothing store posted a higher-than-expected profit and upped 2013 revenue outlook. Chico's reported first-quarter earnings per share of $0.32, versus the Street’s $0.30 view, as shoppers spent more money. The apparel store bumped up its 2013 revenue outlook to between $2.5 billion and $2.6 billion, bracketing analysts’ $2.53 billion expectation.
Target climbs 1.7 percent after the discount chain beat earnings estimates and raised 2012 outlook. Target reported first-quarter earnings per share of $1.11, compared to analysts’ $1.01 view, as warm weather and an early Easter boosted sales. The company provided second-quarter earnings per share guidance above estimates: $1.04 to $1.14 versus $0.99 estimate. Target also raised its 2012 EPS outlook by 5 cents to between $4.60 and $4.80, higher than the Street’s $4.28 view.
Abercrombie & Fitch drops 5.3 percent premarket despite beating on earnings. The teen clothing store drifted lower before the bell after reducing its 2012 same-store sales outlook, expecting a drop in the mid- to single-digit percentage range. Abercrombie posted first-quarter earnings of $0.03 a share, a penny higher than analysts’ $0.02 projection.
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