Behind This Morning's Drop

Futures dropped as housing starts for April came in at 458,000, well below expectations of 520,000, and permits came in at 494,000, also well below expectations of 530,000. However, most of the drop is attributable to lower multifamily construction; single family starts and permits rose, though they are still low.

In the minds of many traders, lower starts and permits is desirable, because it would mean less inventory to work off.

We are in the paradoxical position that the new tax credits for first time and new home buyers may be keeping starts more elevated than normal.


1) Speaking of confidence, Part 2: the rally yesterday, while excellent from the perspective of rising prices, was very suspect because the volume was so light. Going higher on light volume is not a good start to the week.

2) Speaking of confidence Part 3: The German investor confidence expectations rose to the highest levels since June 2006, though opinions on the current situation were essentially unchanged. Still, it is an indication that optimism is spreading.

3) Bank stocks are mostly higher, following through on yesterday's rally.

State Street priced its $2 billion stock offering overnight. The trust bank expects to sell 51.3 million shares of stock at $39 per share. Proceeds will be used to help the firm repay some of its TARP funds.

4) Home Depot, like Lowe's, reported earnings and revenues that beat consensusand reaffirmed guidance for the full year. Still, sales will be down 9 percent for the year; it was down 10.1 percent in the first quarter.

Home Depot is having the same issues that Lowe's is having: people are buying lower-cost items for maintenance, but not the big-ticket items. You can see this in the average ticket price, which declined 8 percent to $52.67.

5) Shares of Saks are rising a sharp 10 percent pre-open after the department store posted better-than-expected Q1 results.

Better inventory, expense, and capital spending management helped its bottom line, but like many luxury goods retailers, Saks struggled to attract shoppers during the quarter. Its Q1 same-store sales plunged a steep 27.6 percent.

This trend will continue for the remainder of the year too. The retailer reaffirmed its forecast for declining sales in 2009, but continues to see lower expenses and capital spending throughout the rest of the year.

6) TJX just out with earnings in line with expectations, noting that traffic was up "significantly across virtually all divisions."

8 Tenet Health Careup 18 percent pre-open after being upgraded to Buy at Goldman Sachs, the analyst says the upgrade is "reflecting our favorable view of urban markets, continued margin improvement, and removal of a leverage overhang as credit markets normalize." Concurrently, Goldman raises the hospital operator's price target from $1 to $5.

9) Medical device maker Medtronic is down 2 percent pre-open, as its Q4 results came inline with the analyst expectations.

Guidance for the current 2010 fiscal year ($3.10-$3.20) disappoints the Street's forecast of $3.21. Additionally, Medtronic expects to eliminate 1,500-1,800 jobs in the next few weeks.

10) Online restaurant reservation service OpenTable raised its IPO pricerange to $16-$18 from $12-$14. The company is expected to begin trading using ticker "OPEN" on the NASDAQ later this week.

11) Well-respected trading firm BTIG is doing its 7th Annual Commissions for Charity Day, where all commissions generated will be donated to 25 the past five years, they have donated over $7 million to local charities. Keep up the good work, guys.




Questions? Comments?