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Sales of New U.S. Homes Fell More Than Forecast in July

Builders are holding back amid constraints on available land and materials in a bid to boost prices and revenue. At the same time, their confidence is surging because more jobs and pent-up demand will probably help sustain gains in housing as homebuyers rush to take advantage of historically low borrowing costs before they rise further.
“The thing that continues to be a little bit puzzling is that builder confidence is still very high and that’s in the face of lower volumes,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “They’re still pretty confident about the backdrop. That gives us a little bit of optimism going into the next few months.”
Stocks were little changed after the report, trimming earlier gains. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,657.93 at 10:19 a.m. in New York. The S&P Supercomposite Homebuilding Index dropped 3.5 percent.
Survey Results
Last month’s sales pace was lower than any estimate of economists surveyed, which ranged from 445,000 to 525,000 after a previously reported 497,000 pace in June. Sales data going back to April were revised down.
New-home purchases were 6.8 percent higher in July than the same period in 2012 on an adjusted basis, today’s report showed. The median price of a new home increased 8.3 percent last month from a year ago to $257,200.
Purchases declined in all four regions in July, paced by a 16.1 percent slump in the West.
The supply of homes at the current sales rate rose to 5.2 months from 4.3 months in June. There were 171,000 new houses on the market at the end of July, up from 164,000 the month before.
Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final.

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U.S. Consumer Confidence Falls From a Six-Year High

Consumer confidence in the U.S. unexpectedly dropped in August from a six-year high as Americans faced rising interest rates.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 80 from 85.1 in July, which was the highest since July 2007. The median projection of 68 economists surveyed by Bloomberg called for little change at 85.2. The decline this month was the biggest since December.

Higher mortgage rates are threatening to crimp momentum in the housing market that’s contributed to the economic expansion. At the same time, job growth and increased personal wealth tied to stock portfolios and home values are helping offset the effects of higher payroll taxes and federal government budget cuts that began early this year.
“Interest rates are going up a little bit, that never helps,” Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said before the report. “But we still have the background of what looks like a still-improving housing market.”
Stocks were little changed after the report. The Standard & Poor’s 500 Index declined 0.1 percent to 1,659.24 at 10:23 a.m. in New York.
Survey Results
Estimates (CONSSENT) in the Bloomberg survey of economists ranged from 82 to 87. The index averaged 89 in the five years leading up to the last recession that began in December 2007 and 64.2 during the 18-month slump that ended in June 2009.
The early August setback in the Michigan index was larger than projected by the weekly Bloomberg Consumer Comfort Index, which slipped from its highest level in more than five years. The comfort gauge fell to minus 26.6 for the period ended Aug. 11, its first drop in a month. The reading was the second-strongest since January 2008, behind the prior week’s minus 23.5.
The Michigan survey’s current conditions index, which takes stock of Americans’ view of their personal finances, dropped to 91 from a six-year high of 98.6 in July. The 7.6 point decline was the biggest in three years.
The group’s index of expectations six months from now decreased to 72.9 in August from 76.5 last month.

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A Private BlackBerry Won’t Matter

NEW YORK (TheStreet) — Shares of beleaguered tech giant BlackBerry (BBRY_) are up nearly 7% Friday following a Reuters report the company‘s CEO and board of directors are “increasingly coming around to the idea that taking BlackBerry private would give them breathing room to fix its problems out of the public eye.”

This move, if true, would not be much of a surprise. For more than a year, we’ve chronicled every step that BlackBerry has taken that would have led to this decision; each step forward, followed by two steps back. It was a tired dance.

Going private, or “underground,” is the logical next step to the company’s recent changes to its disclosure policies.

In the recent quarter, management threw hints that BlackBerry was no longer interested in the public’s scrutiny. It was bad enough that the company could not meet the competitive standards laid out by Apple (AAPL_) and Google (GOOG_), but it was also clear management became frustrated with its own performance standards, which were being lowered each quarter. Following the big “swing and a miss” with its flagship BlackBerry 10 phones, management insisted that going forward it would no longer provide unit shipments numbers or subscription results for its service.

It was clear at that point that BlackBerry, as we knew it, was about to embark on a change. I was curious as to what the company was trying to hide. The company felt that somehow burying bad news would somehow make things better.

I have some serious issues with the idea that BlackBerry management believes that an uneducated body of investors serves the company’s long-term interest. In that regard, it boggles the mind seeing how investors are once again jumping on board this stock this morning.

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Stocks fall after tepid jobs report

A tepid jobs report caused the stock market to stall on Friday, a day after the Standard & Poor’s 500 index broke through 1,700 points for the first time.
Indexes edged down after the U.S. added fewer jobs than forecast in July, curbing optimism that the economy is poised to pick up strength in the second half of the year.

The government reported that 162,000 jobs were created last month, pushing the unemployment rate down to a 4 1/2 -year low of 7.4 percent. The number of jobs added was the lowest since March and well below the 183,000 economists polled by FactSet were expecting.

Brad Sorensen, Charles Schwab‘s director of market and sector research, said the jobs report was “moderately disappointing.”

“That tepid growth we’ve seen, (the economy) not being able to reach escape velocity, continues to be the story,” Sorenson said.

Investors have been watching economic reports closely and trying to anticipate when the Federal Reserve will start easing back on its economic stimulus. The central bank is buying $85 billion in bonds every month to keep long-term interest rates low and encourage borrowing.

The decline in stocks Friday was muted, and indexes gradually erased some of their losses by early afternoon. While the jobs report was disappointing, it likely ensured that the Fed would take its time cutting back on stimulus, said Doug Lockwood of Hefty Wealth Partners.

“As long as there’s this concept that the Fed may still need to be involved and stimulate, that’s good for both the bond and the stock market,” said Lockwood. “You’re seeing the trampoline effect; the market drops and then comes back up.”

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Mortgage Rates Rise Again, But Won’t Spoil The Housing Recovery

Freddie Mac said the average 30-year fixed mortgage rate rose to 4.51% last week, from 4.29%, but while that might worry some buyers looking for a home, it can actually be viewed as an important positive signal.

“Increases in rates would not be occurring if there wasn’t economic growth, says Steve Blitz chief economist at ITG Investment Research. “If people thought the economy was heading south, even with absence of quantitative easing, the rates wouldn’t rise.” remember that rates are still at historic lows. In fact, for every $100,000 in a loan, an increase of 100 basis points only adds $50 to each monthly payment.
“If that makes a difference, you probably can’t afford the home,” says Blitz.

While a slow and steady rise in mortgage rates isn’t expected to stifle demand for housing, the environment makes it less attractive for existing home owners to refinance to lower rates. Over the last several quarters, banks have benefited from the uptick in refinances, but the closing and bank charges that accompany a refinancing may not offer consumers much of a reason to refinance.

Although regional banks such as US Bancorp USB +1.37%, Zions Bancorporation and Fifth Third Bancorp FITB +0.91% could feel the pinch from lower refinancing volume, Blitz doesn’t see this as a major concern: “New mortgages, as opposed to refinancing, could grow a lot faster and offset any loss in the refinancing business,” he says.

Plus, the steepening 10-year Treasury curve over the past month gives banks an even greater incentive to lend money. “This results in more profit on the loans, which is a very powerful force for bank earnings.”

Aside from banks, home builders are on the receiving end of the housing market rebound, even though stock prices have been choppy.
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Washington unemployment jumps to 5.6 percent falling modestly in April, the unemployment rate in the Washington area rose sharply in May, even as most metro areas experienced declines.
The Labor Department’s Bureau of Labor Statistics puts this region’s May unemployment rate at 5.6 percent, up from 5.0 percent in April and higher than the 5.1 percent jobless rate in May 2012.
But the Washington area’s unemployment rate is still among the lowest for cities with a population of more than a million, behind only Salt Lake City, Minneapolis, Oklahoma City and Seattle.
Unemployment rates fell in 253 of nation’s 372 metropolitan areas. The rate rose in 86 and wasunchanged in 33.
Among all cities and towns, the worst unemployment rate in the nation is Yuma, Ariz., at 30.8 percent in May. Bismarck, N.D. remains the city with the lowest unemployment rate, at 2.4 percent.
Among big cities, Minneapolis’s 4.7 percent jobless rate is the lowest. Memphis, at 9.5 percent, had the highest big-city unemployment rate in May.
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Construction Spending in U.S. Rises, Led by Residential Projects

Construction spending in the U.S. climbed in May, led by the strongest expenditures on residential projects in more than four years.
Outlays (CNSTTMOM) grew by 0.5 percent to an $874.9 billion annualized rate, the Commerce Department reported today in Washington. The median forecast of 53 economists surveyed by Bloomberg called for a 0.6 percent rise. Spending on housing climbed to the highest level since October 2008.

A pickup in residential real estate is helping to offset weakness in non-residential construction, giving economic growth a lift. Public works also picked up in May, led by gains at the state and local level that indicate improving municipal budgets are making up with weakness at the federal level created by across-the-board budget cuts known as sequestration that began in March.
“You’re going to see a stronger trend as homebuilding continues to pick up,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “If we get much better job growth, it would help to support a longer-term trend of growth in construction.”
Estimates in the Bloomberg survey ranged from a drop of 0.1 percent to a 1.8 percent gain. April’s reading was revised to a 0.1 percent advance from the initial estimate of a 0.4 percent gain.
Today’s report contained revisions back to January 2011. The combined effects was to lift the level of spending in April from an $860.8 billion annual pace to $870.3 billion, or a 1.1 percent increase.
12-Month Gain
Construction spending increased 6.2 percent in the 12 months ended in May before adjusting for seasonal variations.
Housing outlays climbed 1.2 percent to a $322.3 billion annualized pace. Private non-residential projects dropped by 1.4 percent to the lowest level since February 2012.
Gauges of housing growth have been positive. Sales of new properties advanced in May to a 476,000 home annualized pace, the highest level in almost five years, the Commerce Department reported.
Improvements in spending driven by housing would help companies including 3M Co. (MMM) The St. Paul, Minnesota-based maker of Scotch tape also sells home and construction products and is expected a pickup in business as homeowners become more active.
“We also have a very good construction, home improvement business which clearly will benefit and is benefiting from things when people are renovating their home,” David Meline, the company’s chief financial officer, said in a June 12 presentation. “Consumer business looks quite good for us.”
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Sprint May Be Off the Table, but Dish’s Deal Appetite May Remain

Charles W. Ergen is regarded as one of the wiliest negotiators in the business world. But in a little over a week, Mr. Ergen, chairman of the Dish Network, has been dealt two tough hands, one at Sprint Nextel and the other at Clearwire.

Both may pose problems for his apparent dream of transforming Dish from a satellite television company into a bigger wireless services giant. That doesn’t mean that Mr. Ergen is walking away from deal-making altogether.

Dish has clearly signaled that it will walk away from Sprint, after SoftBank of Japan raised its takeover offer for the cellphone service provider to $21.6 billion. The company said on Friday that it would pay back $2.5 billion in recently issued bonds meant to back a Sprint takeover.

And though Dish seemed ready to buy a significant stake in Clearwire as recently as last week with a bid of $4.40 a share, Sprint’s revised offer of $5 a share on Thursday made that prospect seem dicier. With the newly sweetened proposal — Sprint’s third bid since last fall — roughly 45 percent of Clearwire’s independently held shares are expected to be tied to that approach.

Dish hasn’t commented yet on the latest counterpunch by its rival. But several analysts expect Sprint’s offer to prevail.

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Dow suffers first 3-day drop this year

Stocks fell for a third consecutive session Wednesday, resulting in the first 3-day drop in the Dow Jones industrial average this year.

Markets have been volatile as of late as investors are increasingly worried about when the Federal Reserve and other central banks will begin pulling back from their economic stimulus policies.

The Dow fell 127 points, or 0.8%, to 14,995, according to preliminary calculations. The Standard & Poor’s 500 index dropped 13 points, or 0.8% to 1,163, and the Nasdaq composite index fell 37, or 1.1% to 3,400.

The Dow has fallen more than 300 points since the start of the week. The S&P has given up 30 points. The last 3-session Dow drop was at the end of 2012 when it suffered a 5-day down streak from December 21-28.

Stocks tumbled in a global sell-off Tuesday as renewed concerns about central banks easing off their efforts to support the global economy weighed on markets worldwide. The Dow fell 0.8% to 15,120.86, the S&P 500 dropped 1.0% to 1,626.15 and the Nasdaq composite index declined 1.1% to 3,436.95.

TUESDAY: Volatile stocks tumble in global sell-off

WHAT TO WATCH: Despite bond losses, ‘Great Rotation’ still on hold

With no major economic news or corporate earnings coming out, traders focused on when and by how much central banks will pull back.

“There’s nothing concrete out there to turn us around today,” Russell Croft, co-portfolio manager at the Croft Value Fund in Baltimore. “So naturally enough, people are back to thinking about the Fed.”

The yield on the 10-year Treasury note edged up to 2.23% from 2.18% late Tuesday.

Oil prices rose above $96 a barrel before pulling back. Benchmark crude for July delivery rose 47 cents to $95.85 per barrel in electronic trading on the New York Mercantile Exchange. In the prior session, the contract fell 39 cents to settle at $95.38.

Asian stocks fell for a second day Wednesday amid concern about a lack of new Japanese moves to calm bond markets and uncertainty about the outlook for U.S. monetary policy. Tokyo’s Nikkei 225, the regional heavyweight, shed 28.30, or 0.2%, to 13,289.32.

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Stocks lower for third straight day

Stocks were lower again Thursday following two days of losses that have investors concerned we are heading for a correction.

The Dow Jones industrial average was down 77 points, or 0.5% at midday. The Dow dropped 217 points the day before. The index of 30 big-name stocks could be headed for its first three-day losing streak this year.

The Standard & Poor’s 500 index was down 6 points, or 0.4%. The Nasdaq composite fell 14 points, or 0.4%.

The focus on Wall Street has now shifted from how high stocks will climb to whether the market is on track for its first drop of 5% or more since November 2012. The broad market hasn’t suffered a more severe “correction,” commonly defined as a drop of 10% or more, since the fall of 2011.

OUTLOOK: As stock mojo wanes, more calls for pullback

Earlier in the day, stock futures had rocketed 3% for a minute or two Thursday morning just ahead of the 8:30 a.m. release of a weekly report on claims for unemployment benefits.

Just as quickly, stocks fell back as traders realized it was a false report. The Labor Department’s report was released as scheduled. The government said weekly claims for unemployment benefits fell modestly the week ended May 30.

Wall Street sank Wednesday. The Dow fell 1.4% to 14,960.59. The S&P 500 declined 1.4% to close at 1,608.90. The Nasdaq composite index was off 1.3% to 3,401.48. At the close Wednesday, the S&P 500 was 3.6% lower from it’s record close on May 21 — eclipsing the 3.5% drop it suffered in April.

WEDNESDAY: Dow, S&P 500 dive on rising interest rates

The European Central Bank left its benchmark interest rate at a record low of 0.5% on Thursday even though there’s still a recession in the 17 countries that use the euro. The Stoxx Europe 600 index was trading lower — down 1.1%. The major indexes in the U.K., France and Germany were all down more than 1%

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