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Wall Street Reform
President Obama is in my town today, giving a speech on Wall Street reform at Cooper Union. Meanwhile, five economic reports and more turmoil in Greece have equity and forex markets flustered. That's not to mention heavy activity on the earnings front. Also, do not forget that it's Earth Day; the NYSE Euronext Green Summit is on in New York City (NYSE: NYX).
This particular note keys on the President's selling of financial regulation. It's a crying shame that this has become a political issue. The Democratic Party is pushing for it against politically driven push back from the Republicans. Just like with health care, the Republican argument is not that the idea is wrong, but rather that the details are off, and off by far. This is exactly the kind of political nonsense America is growing tired of, and one Greek-American as well; but it is a fault of human nature and selfishness more than of any particular party.
At some point, Americans will reach a critical threshold of disgust, and signs of it are already apparent in gunfire at the Pentagon and kamikazes at the IRS. When will Capitol Hill take notice? It seems to me, the party that is not in power is more often guilty of political game playing, though I have grown disgusted with my old Republican party for its seemingly consistently flawed inhuman positions, despite my conservative values. Still, I cannot stand as a pure Democrat either, due to my support of human life and faith-driven values. So, it seems Americans are drifting toward the middle with me, toward independence; and voting across party lines in the process. And we are growing wiser as well, and learning about the abuses of media messages for the sake of often impure cause.
President Obama's Regulatory Crusade
So President Obama is in my town today, blocking up traffic and making a mess of things. That's exactly what he wants to do though, shake up Wall Street, and God bless him for it. Stop the presses! Yep, Wall Street Greek is for Wall Street reform, to a degree. While I'm not for discriminatory taxes like the Financial Crisis Responsibility Fee, I'm for the intensified regulation that Ben Bernanke and Tim Geithner are pushing. I think companies like Lehman Brothers and AIG (NYSE: AIG) should have been better watched and contained. We need Wall Street reform, and that should be apparent; though if you need reminding, see Geithner's testimony on the Lehman failure. I think you are aware of Goldman's (NYSE: GS) role in Greece. I expect we understand the rating agencies' failures by now, and their punishment is coming.
Anyway, I listened to the President before publishing this piece. He began by reminding Americans, who it seems some legislators believe have short memory, about the financial catastrophe we just survived. He reminded us that the job loss rate was plus 700K per month at one point last year. President Obama said that Americans and the Administration cannot be satisfied without real recovery and a lasting rebuilding of the economy. He said that we cannot leave the same structure in place, "That crisis was born from a failure of responsibility, from Wall Street, all the way to Washington." Basically, the President is doing his best to remind Americans why we need reform, which will get it passed. The SEC is doing its fine part as well, despite its curious timing.
So, are you buying what the President is selling?
Day's Economic Data & Market Drivers
Weekly Jobless Claims
In our weekly copy, "This Week," we said unemployment would likely stick high again this week, but that it might start to reflect census worker hiring. It looks like we were right again, as claims eased a bit off last week's peak to 456K in the period ended April 17. The April 10 claims figure was revised slightly to 480K, from 484K. The four-week moving average of claims moved upwards by 2,750, to 460,250. The change in the moving average must be unsettling for Administration officials, because the labor market is critical for lasting and driving economic recovery.
Higher commodity prices in March were expected to play a significant role in the month's Producer Price Index (PPI), but not as significant as they did. March's Headline PPI increased by 0.7%, exceeding economists' expectations for a 0.4% gain. The upward surprise was most likely due to economists' underestimation of the rise in food prices. Over 70% of the hike in producer prices is explainable by a 2.4% increase in consumer foods. Cold weather in growing regions hurt vegetable production significantly, causing a 49.3% increase in vegetable prices. Have you noticed?
Energy prices recovered 0.7% after declining the month before, and were aided by another month (5 of last 6) of gasoline price increase (2.1% in March). Excluding food and energy, Core PPI inched higher by 0.1%, matching expectations and comparing against February's 0.1% increase. Pricing seems to be gaining momentum, up 6.0% over the last 12 months, which is the greatest increase since September of 2008.
Existing Home Sales
In our weekly copy, we said Existing Home Sales should recover from the depressed levels of February, but that the First-Time Homebuyer Tax Credit would not drive stellar figures just yet. We noted that the credit only requires entry into contract by April's end. Home Sales are recorded on closing though, which has until June's conclusion to qualify for the credit.
Existing Home Sales did improve, as expected, to an annual pace of 5.35 million in March, above economists' expectations for a pace of 5.25 million. The 6.8% increase over February's depressed level of 5.01 million, shows signs of a spring fling. As we have told here before, year-over-year comparisons for March and April are going to prove fantastic; this is because of last year's panic-level anemic economic activity. Indeed, Existing Sales improved 16.1% over last year's pace.
Existing home sales have trended higher on year-to-year comparison for nine consecutive months now, and inventory has trended lower for 20 months. Inventory fell to an 8.0 month supply in March, down from 8.5 months in February, and that's despite an increase in homes for sale. Thus, the pace of sales increase outpaced the rate of homes reaching the market. Indeed, the increase in homes for sale reflects positively for the market, assuming shadow inventory is not contributing (foreclosed property held by banks). To this end, National Association of Realtors Chief Economist Lawrence Yun said, "Foreclosures have been feeding into the inventory pipeline at a fairly steady pace and are being absorbed manageably." Yun also said the NAR would not be requesting an extension of the tax credit, but we suspect that might be due to its unlikelihood anyway. In any event, we've written here that this housing stimulus is reaching a threshold point, where it has little new punch.
Prices improved again, and I view this pricing data the most important (vs. S&P Case Shiller or FHFA), because it is relevant and current. The median price of an existing home sold for 0.4% more in March. The only two factors holding back activity now are still high unemployment and still tight lending standards; only one of which is acceptable. We know lending standards are tight because cash sales remain at a high percentage, though these are also a mainstay of foreclosure sales, which are common now.
Home prices for FHFA sponsored mortgages declined again in February, by 0.2%, and were down 3.4% over 12 months. The charts that the FHFA offers are telling me something. While I believe prices are still overvalued, it looks as though there is support at currently inflated rates. Prices could stick at overvalued levels, without the introduction of new catalyst, in my view. My analysis is thumbnail sketch here, and is missing important consideration of the value add of a FHFA sponsorship and its increased popularity over the years. Therefore, prices may be legitimately bottomed, and not necessarily overvalued.
Natural Gas Supply
The EIA reported on Natural Gas Inventory today. Data for the period ended April 16 showed a net increase of 73 Bcf (87 Bcf last week). We are in a seasonal building period now, and so stocks, currently 286 Bcf above the five-year average for this time of year should hold above normal.
Corporate Earnings Reports
We'll cover individual earnings data in our article on the day's "most active" stocks, if an article is published.
Look for EPS from Verizon (NYSE: VZ), American Express (NYSE: AXP), Amazon.com (Nasdaq: AMZN), PNC Financial Services (NYSE: PNC), Philip Morris Int'l (NYSE: PM), Union Pacific (NYSE: UNP), Pepsico (NYSE: PEP), Microsoft (Nasdaq: MSFT), Baxter International (NYSE: BAX), A.T. Cross Country (Nasdaq: ATX), ABB Ltd. (NYSE: ABB), Acacia Research (Nasdaq: ACTG), Advanced Energy Industries (Nasdaq: AEIS), Air Products & Chemicals (NYSE: APD), Alaska Air Group (NYSE: ALK), Alexion Pharmaceuticals (Nasdaq: ALXN), Align Technology (Nasdaq: ALGN), Alliance Fiber Optic Products (Nasdaq: AFOP), Amdocs Limited (NYSE: DOX), American Greetings (NYSE: AM), American River Bankshares (Nasdaq: AMRB), AmerisourceBergen (NYSE: ABC), Amsurg (Nasdaq: AMSG), Applied Industrial Technologies (NYSE: AIT), Arbitron (NYSE: ARB), Arthur J. Gallagher (NYSE: AJG), Associated Banc-Corp (Nasdaq: ASBC), AU Optronics (NYSE: AUO), Autobytel.com (Nasdaq: ABTL), AutoNation (NYSE: AN), Avid Technology (Nasdaq: AVID), BancorpSouth (NYSE: BXS), BB&T Corp. (NYSE: BBT), BJ's Restaurants (Nasdaq: BJRI), Briggs & Stratton (NYSE: BGG), Bucyrus Int’l (Nasdaq: BUCY), Builders FirstSource (Nasdaq: BLDR), C.R. Bard (NYSE: BCR), Cabot Microelectronics (Nasdaq: CCMP), Capital One Financial (NYSE: COF), Cash America Int'l (NYSE: CSH), Cepheid (Nasdaq: CPHD), Chubb (NYSE: CB), Citizens Banking (Nasdaq: CRBC), CoBiz (Nasdaq: COBZ), Coca-Cola FEMSA (NYSE: KOF), Columbia Sportswear (Nasdaq: COLM), Computer Programs & Systems (Nasdaq: CPSI), Continental Airlines (NYSE: CAL), Cooper Industries (NYSE: CBE), Courier Corp. (Nasdaq: CRRC), Credit Suisse (NYSE: CS), Cymer (Nasdaq: CYMI), Cypress Semi (NYSE: CY), Cytec (NYSE: CYT), Danaher (NYSE: DHR), Deckers Outdoor (Nasdaq: DECK), Deluxe Corp. (NYSE: DLX), Developers Diversified Realty (NYSE: DDR), DeVry (NYSE: DV), Diamond Offshore Drilling (NYSE: DO), Digi International (Nasdaq: DGII), Eastman Chemical (NYSE: EMN), Education Realty Trust (NYSE: EDR), Endologix (Nasdaq: ELGX), Ensco (NYSE: ESV), EZCorp (Nasdaq: EZPW), Federated Investors (NYSE: FII), Fifth Third Bancorp (Nasdaq: FITB), Freescale Semiconductor (NYSE: FSL), Gardner Denver (NYSE: GDI), GATX Corp. (NYSE: GMT), Gentex (Nasdaq: GNTX), Glacier Bancorp (Nasdaq: GBCI), Goodrich (NYSE: GR), Grupo Aeroportuario de Surest (NYSE: ASR), Hawaiian Holdings (NYSE: HA), Healthways (Nasdaq: HWAY), Hittite Microwave (Nasdaq: HITT), HNI Corp. (NYSE: HNI), Insteel Industries (Nasdaq: IIIN), Interactive Brokers (Nasdaq: IBKR), International Game Technology (NYSE: IGT), Interphase (Nasdaq: INPH), Invacare (NYSE: IVC), Isilon Systems (Nasdaq: ISLN), ITT Educational Services (NYSE: ESI), J&J Snack Foods (Nasdaq: JJSF), JAKKS Pacific (Nasdaq: JAKK), Janus Capital (NYSE: JNS), Kensey Nash (Nasdaq: KNSY), Kimberly-Clark (NYSE: KMB), KVH Industries (Nasdaq: KVHI), L.B. Foster (Nasdaq: FSTR), L-3 Communications (NYSE: LLL), Lacrosse (Nasdaq: BOOT), Lattice Semiconductor (Nasdaq: LSCC), Lender Processing Services (NYSE: LPS), Life Time Fitness (NYSE: LTM), LIN TV (NYSE: TVL), Local.com (Nasdaq: LOCM), LodgeNet Interactive (Nasdaq: LNET), LSI Industries (Nasdaq: LYTS), Marriott International (NYSE: MAR), Matthews International (Nasdaq: MATW), MBT Financial (Nasdaq: MBTF), Micrel Semiconductor (Nasdaq: MCRL), Microsemi (Nasdaq: MSCC), Midwestone Financial (Nasdaq: MOFG), MKS Instruments (Nasdaq: MKSI), NCR Corp. (NYSE: NCR), Nokia (NYSE: NOK), Nucor (NYSE: NUE), OceanFirst Financial (Nasdaq: OCFC), Old Republic International (NYSE: ORI), OSI Pharmaceuticals (Nasdaq: OSIP), PC-Tel (Nasdaq: PCTI), PDF Solutions (Nasdaq: PDFS), Peabody Energy (NYSE: BTU), Penn National Gaming (Nasdaq: PENN), Performance Technologies (Nasdaq: PTIX), Pixelworks (Nasdaq: PXLW), PMC-Sierra (Nasdaq: PMCS), PNC Financial (NYSE: PNC), Pool Corporation (Nasdaq: POOL), Precision Drilling (NYSE: PDS), Premiere Global Services (NYSE: PGI), ProLogis (NYSE: PLD), Provident Financial Services (NYSE: PFS), Rambus (Nasdaq: RMBS), Ramtron (Nasdaq: RMTR), Raytheon (NYSE: RTN), Reddy Ice (NYSE: FRZ), Reliance Steel (NYSE: RS), Reynolds American (NYSE: RAI), Rimage (Nasdaq: RIMG), Riverbed Technology (Nasdaq: RVBD), Rocky Brands (Nasdaq: RCKY), RSC Holdings (NYSE: RRR), Sandy Spring Bancorp (Nasdaq: SASR), ScanSource (Nasdaq: SCSC), Scientific Learning (Nasdaq: SCIL), Sherwin-Williams (NYSE: SHW), Sify Ltd. (Nasdaq: SIFY), Sigma-Aldrich (Nasdaq: SIAL), Sonoco (NYSE: SON), Southern Community Financial (Nasdaq: SCMF), Southwest Airlines (NYSE: LUV), Sterling Bancshares (Nasdaq: SBIB), STMicroelectronics (NYSE: STM), SVB Financial (Nasdaq: SIVB), Sybase (NYSE: SY), Synaptics (Nasdaq: SYNA), Syntel (Nasdaq: SYNT), Taubman Centers (NYSE: TCO), TCF Financial (NYSE: TCB), Tennant (NYSE: TNC), Textron (NYSE: TXT), The Blackstone Group (NYSE: BX), The Cheesecake Factory (Nasdaq: CAKE), The Hershey Co. (NYSE: HSY), The Inventure Group (Nasdaq: SNAK), The McClatchy Co. (NYSE: MNI), The New York Times (NYSE: NYT), TradeStation (Nasdaq: TRAD), Ultratech (Nasdaq: UTEK), Umpqua Holdings (Nasdaq: UMPQ), United Community Banks (Nasdaq: UCBI), Valley National Bancorp (NYSE: VLY), Vicor (Nasdaq: VICR), Virginia Commerce (Nasdaq: VCBI), W.R. Grace (NYSE: GRA), Washington Banking (Nasdaq: WBCO), Wastco (NYSE: WSO), Webster Financial (NYSE: WBS), WESCO International (NYSE: WCC), Western Alliance Bancorp (NYSE: WAL), Western Digital (NYSE: WDC), Wilshire Bancorp (Nasdaq: WIBC), Wipro (NYSE: WIT), WNS Holdings (NYSE: WNS), Woodward (Nasdaq: WGOV), Yadkin Valley Bank (Nasdaq: YAVY), Young Innovations (Nasdaq: YDNT) and Zimmer Holdings (NYSE: ZMH).
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