Trader Talk

Fannie Mae, Oil Comments Not To Market's Liking

Futures lower here by about 9 points, partly due to Fannie Mae, but Goldman's bullish comments on oil aren't a big help either.

1) Disappointing report from Fannie Mae . They reported a loss of $2.57 per share, well above the loss of $1.48 estimated by analysts. A larger provision for credit losses was the main culprit. They're also raising $6b in new capital through offerings of common and convertible and non-convertible preferred stock.

To top it off, they cut their dividend to $0.25 from $0.35 per quarter. Their outlook on the housing market is a tad gloomier; they now expect prices to decline 7-9 percent on a national basis in 2008; they had previously seen prices down 5-7 percent. Fannie is down 7 percent pre-open. Freddie Mac down 4 percent.

2) Goldman is getting even more bullish on oil. A note out this morning asks, "Has the super-spike end game begun?" They say the current energy crisis may be coming to a head, that lack of adequate supply growth could spike oil to $150-$200 a barrel in the next 6-24 months. They remain bullish on most of the energy sector.

Vulcan Materials will be a big loser. They missed big, and sales were well below expectations. Down 10 percent.

3) Home builder DR Horton , like their colleagues,reported losses much greater than expected. Like their colleagues, there were large pre-tax charges (about $834 m) for inventory impairments (read: our houses and land are worth less) and write-offs of deposits and pre-acquisition costs. The only good news here is that orders were down about 25 percent, that is certainly an improvement over the prior quarter, when orders were down over 50 percent.

4) NYSE Euronextalso reported earnings better than expected. The gain appears to have come from lower expenses and lower taxes. Takeaway: they're doing a good job on cost control, with merger-related savings a big plus. It will be the same with the takeover of the AmEx: up to 75 percent of the AmEx staff may lose their jobs through costs savings. Now if only they can stop the decline in market share...

Questions?  Comments?