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Pre-Market Primer: Dell Profit Plummets; Housing Starts Rise


Labor costs rose in the second quarter after falling in the first.

Stock futures indicate that the major indices might rebound slightly after yesterday's huge losses as labor costs and housing starts rose.

A report on housing starts this morning showed that builders broke ground on homes at an annualized rate of 896,000 homes in July, up 5.9% from 846,000 in June. This was largely in line with economists' expectations.

Second quarter non-farm productivity and labor costs both rose more than expected. Productivity is up 0.9% after falling 1.7% in the first quarter while unit labor costs rose 1.4% after falling 4.2% in the first three months of the year.

US stock index futures erased only some of yesterday's losses this morning. Dow (INDEXDJX:.DJI) futures were up 0.13% to 15,089 while futures contracts on the S&P 500 (INDEXSP:.INX) rose 0.25% to 1,659.80. Nasdaq (INDEXNASDAQ:.IXIC) futures also gained 0.26% to 3,079.00. Yesterday, the three indices fell 1.47%, 1.4%, and 1.72%, respectively. The markets erased about $100 billion of wealth.

Still to come later this morning is the preliminary report on consumer sentiment from the University of Michigan and Reuters. The index is likely to show that sentiment rose slightly to 85.5 from 85.1 in August.

Overseas stock markets also declined on Friday. The European Union's consumer prices guage showed that the region deflated 0.5% over the course of July, coming in line with the previous estimate. On a yearly basis, prices are 1.6% higher. Such persistently low inflation gives the European Central Bank more leeway in case they opt for even more aggressive monetary stimulus. Europe's trade balance also came out today, showing that imports rose 2.5% over June while exports rose 3%. Imports were 6% lower than in June 2012 and exports were down 3%.

A judge yesterday held off on allowing American Airlines' parent group AMR Corp (OTCMKTS:AAMRQ) from exiting bankruptcy by merging with US Airways (NYSE:LCC) due to opposition from some states and the Department of Justice.

The documents leaked by Edward Snowden that revealed that US tech firms cooperate with America's National Security Agency to allow surveillance of users might cause trouble for those companies abroad. A paper by China's Ministry of Public Security is preparing to investigate security at IBM (NYSE:IBM), Oracle (NASDAQ:ORCL), and EMC Corp (NYSE:EMC), according to Reuters. China may steer away from awarding contracts to those companies to support critical information infrastructure, much the same way Huawei (SHE:002502) is suspected in the US.

Dell's (NASDAQ:DELL) net profit plunged 72% due to price cutting in the second fiscal quarter. Revenues were flat from the year earlier at $14.5 billion. Adjusted earnings per share, Dell earned $0.25, beating forecasts by a penny. The crucial PC division saw sales slide 5%. Currently, founder Michael Dell is fighting other investors including Carl Icahn to bring his company private to turn it around without the scrutiny of the public markets.

Twitter: @vincent_trivett
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