The surprise monetary easing by the Bank of Japan and
positive-looking housing data on the home front provide a favorable
backdrop for today's trading action. The Bank of Japan action is
along the lines of what the Fed announced last week. But while the
Fed's action is directed at the housing market, the Japanese action
seems to be aimed at that country's exchange rate.
The August Housing Starts data came in a bit weaker than expected,
down 1% to a seasonally adjusted annual rate of 750K vs.
expectations of around 765K. The prior month's Starts tally was
modestly revised down 733K from 746K, down 2.8%. Permits came in
better than expected, down 1% to 803K, reversing the strong 6.7%
gain to 811K in July.
The modest Starts disappointment notwithstanding, the level is not
materially different from where it has been in recent months and
generally consistent with the positive momentum on the housing
front. Tuesday's strong gains in the homebuilder sentiment index
pushed to its highest level since 2006, improving the odds that the
sector's recovery was on track.
We should keep in mind, however, that the improvement is from a
low base as the long-term historical average for Starts is around
double the current level, while Starts at the 'bubbly' peak were
north of the 2.2 million mark. We will probably never go back to
that level, but we do need to see a sustainable recovery in this
key sector of the economy. Sales and inventories have stabilized,
but the concern is that the pricing recovery could get derailed due
to the shadow inventory of foreclosure pipeline and the anemic
labor market strength.
In corporate news,
) announced a 15% increase in its quarterly dividend. On the
) came out with better-than-expected bottom lines, but both missed
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