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Housing Starts Hit Home

Housing starts were terrible, well below expectations (multifamily construction down 25 percent). The only good news is that 30-year mortgage rates dropped below 5 percent, according to the Mortgage Bankers Association. Refinancings shot up, but applications to purchase rose a more modest 9 percent.

GM's viability plan is having a negligible effect on GM's stock this morning (up 3 percent), and with good reason. It doesn't change anything.

While an update on business—and a plan for the future—is important to have, not a single person I have spoken to or read a note from this morning has changed their negative opinion on GM.

Rod Lache at Deutsche Bank echoed the sentiment of most traders in a note to clients: "Overall, the major takeaway was that GM's company's global business outlook has deteriorated significantly... the company's previous downside case for North America is now its base case."

Lache, like many analysts, has a Sell rating based on the expectation that the existing equity will be diluted to near zero.

Elsewhere:

1) Deere down 4 percent pre-open, reported earnings of $0.48 vs. $0.63 expected, they cite high raw material costs and dollar strength. The machinations with the dollar are adding to the uncertainty over the earnings outlook. They are suspending earnings guidance, but they are projecting that full year equipments sales will be down 8 percent.

2) Goodyear Tire down 11 percent pre-open, reported a loss greater than expected. Sales were 25 percent below the same quarter of 2007. Like many companies, they are trying to adjust to the new economic realities: freezing salaries, cutting capital expenditures, reducing inventory levels, pursuing sale of non-core assets. While they are not providing guidance, the Street is already factoring in significantly lower volumes.

3) Hope springs eternal: Merrill Lynch's monthly survey of fund managers indicates renewed optimism on the global economic outlook—why? Because they believe that China's stimulus package will help refuel growth in that country. There is a small group of traders attempting a reflation trade—they have been buying commodities and commodity stocks. The Shanghai Composite dropped 4.7 percent today.

    • MBIA Splits Off Public Finance Company

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