Market Recap: Subprime Rescue Plan Rescues Stocks
The subprime rescue plan rescued the markets. Markets finish higher despite mixed retail sales.
Stocks started the session this morning mostly in positive territory as the markets anticipated President Bush's details of the subprime rescue plan. The sentiment was also boosted in part by earnings from homebuilder Toll Brothers (TOL). The company reported results above the Street's expectations of -$0.52 EPS versus -$0.77 consensus. Revenues came in at $11.169 bln versus expectations of $1.165 bln. Although those numbers surprised the Street, Professor Depew offered highlights, or lowlights, from the conference call, noting on the Buzz that the company had its toughest year in over 40 years of operation.
He also noted that incentives are averaging $50k per home or 7.5%, compared to 30k and 4% this time last year. Professor Sedacca noted, however, that the company's balance "is probably OK." Homebuilders surged on the day, with TOL closing +13.03%, Lennar (LEN) adding +15.26%, and Hovnanian (HOV) added 17.62%. Toddo had been playing Pulte Homes (PHM). That stock closed up +12.7%. Read Toddo's Thursday's With Story: Yesterday's Upside Catalyst.
Stocks traded higher as details of the subprime rescue plan were announced around midday by President Bush. Under the plan, homeowners who are able to afford the current teaser rates but not the higher payments may get relief under the new plan by refinancing into a new loan, moving into an FHA-Secure loan, or have their rates frozen for five years. Toddo noted the rise in stocks, "Moral Hazard or not." The catalyst allowed financial stocks to close on their highest levels of the day. Goldman Sachs (GS) closed +1.95%, Bear Stearns (BSC) added +6.06%, Lehman Brothers (LEH) gained +5.22%, and Morgan Stanley (MS) finished +2.9%. For more, read Professor Depew's Five Things You Need To Know.
Many retailers also reported monthly same-store-sales figures. Gap (GPS) shares surged after the numbers surpassed expectations. Same-store-sales for November came in unchanged versus an expected decline of -4.6%. Wal-Mart (WMT) added +0.76% with its November figures coming in at 1.5% versus 1.2% consensus. Shares of Zumiez (ZUMZ) plunged -14.22% after the company reported November figures of +5.6% versus analyst estimates of +7.7%. Professor Macke warned readers not to pick a bottom in specialty retailers such as Zumiez. For more, read his article Grim Expectations and Bland Realities For November.
Elsewhere the weekly initial claims data come in at 338k versus 335k consensus. The prior week was revised to 353k from 352k.
Commodities had a strong day with crude oil adding +2.74 to 90.23. Gold gained +3.4 to 807.10. Silver added +0.16 to 14.62, and copper added 0.85 to 304.85.
For more summaries, click on Minyanville's Buzz Bits.
Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.
Some bullish trade or investment ideas: XLNX, ALTR, ISRG, MA, CDS, VZ, FCSX, GOOG, VMW, MOS, MOT, GSS, ITRI, BZP, TXCO, CLR, COP, SLB, RIG, RIG, CHT, AYI
Some bearish trade or investment ideas: RHBBY, SPX, SIGM, BIDU, VMI, FMD, CF
Did you catch Professor Depew on FOX Business Happy Hour? Well, then, join us at the Red Lion for the Rollin' Bones! Have a great night!
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