The French rating downgrade reminds investors about the
still-unresolved Euro-zone situation, and will likely take the
sheen off the market's optimistic view of the 'Fiscal Cliff'
situation over the last two trading sessions. Offsetting the
French overhang today is the very strong October Housing Starts
report, providing another reassuring look at the improving
In corporate news,
) reference to accounting 'improprieties' related to its Autonomy
acquisition drown out everything else in its quarterly report.
The PC maker's earnings numbers are not that bad. But the mere
mention of accounting issues has prompted investors to flee.
) also came short of expectations in its earnings report.
The October Housing Starts data came in better than expected,
up 3.6% to a seasonally adjusted annual rate of 894K (872K). The
prior month's Starts tally was modestly revised down to 863K from
872K. Permits were roughly in-line with expectations, coming in
at 866K vs. permits level of 890K in September (revised lower
from 894K originally reported). Single-family permits increased
to the highest level since July 2008, while multi-family permits
On the Starts front, single-family starts modestly declined from
the preceding month's pace, while multi-family starts increased
11.9%. Two of the four regions showed gains, with the West
showing a 17% jump and the Midwest increasing by 8.9%. Starts
were down 6.5% in the Northeast and 2.5% in the South.
Sandy reportedly had minimal impact on the data.
homebuilder sentiment report for November and the Existing Home
sales report for October showed similar strength, with sales
reaching their highest level of the year to the seasonally
adjusted annual rate of 4.79 million. This was the 16th
consecutive monthly gain in sales, with the October tally up 2.1%
from the preceding month and 10.9% from the year before.
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The gains have started to show up in positive momentum in median
home prices and a drop in available-for-sale inventories. About a
third of the October sales represented homes that had been on the
market for a month or less, while current inventories are the
lowest since February 2006.
The level of the homebuilder sentiment index has historically
showed a strong correlation with Housing Starts data. Some
analysts estimate that the current level of the index is
consistent with housing starts that are double the current pace.
This implies significant upside potential to construction
activities even if the sentiment indicator levels off in the
This bodes well for the contribution of residential construction
activities to economic growth in the coming quarters, partly
offsetting the slowdown in manufacturing and exports. Bottom
line, housing has emerged as a bright spot for the U.S.