Stocks jump on housing data, stimulus hopes

The Dow climbs more than 100 points as US building permits increase and April housing starts are revised upwardly. Investors hope for more monetary easing as the Fed kicks off a 2-day policy meeting.

By TheStreet Staff Jun 19, 2012 9:06AM

TheStreetImage: Wall Street sign (© Corbis/SuperStock) Updated at 12:08 a.m. ET

By Andrea Tse

Stocks rose Tuesday amid signs of a stabilizing housing market and hopes for more stimulus from the Federal Reserve.


The Dow Jones Industrial Average ($INDU) was up by 123 points at 12,865. The S&P 500 ($INX) was up by 14 points at 1,359. The Nasdaq Composite ($COMPX) was up by 35 points to 2,930.


The U.S. Commerce Department on Tuesday reported that housing starts fell 4.8% to a seasonally adjusted annual rate of 708,000 in May, from an upwardly revised April estimate of 744,000. The 744,000 figure was the best data on this indicator dating back to 2007. Economists surveyed by Thomson Reuters had expected a 720,000 annual pace for May.


Building permits rose 7.9% to a seasonally adjusted annual rate of 780,000 from an upwardly revised 723,000. Economists had projected an annual rate of 728,000 for May.


"Overall, a mixed read from the housing sector but one that is consistent with further stability in the single-family market," said Ian Lyngen, a strategist at CRT.

The Federal Reserve's two-day meeting begins Tuesday, and analysts say there is the possibility of some kind of stimulus, most likely with the extension of Operation Twist.


"Our long-held view, initiated last October, is that the Fed will launch QE3 by early fall," said Michael Hanson, a senior U.S. economist at Bank of America. "That remains our view today. We also now think that the Fed will not start hiking interest rates until mid-2015 at the earliest."


"We see roughly a 1-in-3 chance of a significant policy easing at the June FOMC meeting," Hanson said. He thinks the Fed statement on Wednesday after its meeting will be "quite dovish" and would not be surprised to see stronger language around policy, "perhaps replacing 'stands ready' to adjust its balance sheet for the 'is prepared' that it has used since June 2011."


When the updated projections are released, Hanson expects downward revisions to the Fed's above-consensus gross domestic product growth forecasts and a wider range of views as the doves raise their unemployment rate projections and lower their inflation expectations.

Stocks closed mixed Monday as the pro-bailout party's victory in Greece over the weekend provided only a fleeting dose of relief to the eurozone debt crisis. The election results quelled immediate concerns about Greece's being on a path to leave the single-currency bloc, but news of rising borrowing costs for Spain kept a lid on investor enthusiasm over the outcome.

In Greece, leaders raced to build a coalition government to renegotiate the terms of the nation's 130 billion-euro bailout deal with the European Union and International Monetary Fund. 

In Spain, the eurozone's fourth-largest economy, the yield on 12-month Treasury bills rose to 5.07% and on 18-month bills to 5.11%, Reuters reported. While yields on 10-year bonds eased slightly to around 7%, the debt auction underscored the government's increasingly shrill pleas for help from the European Central Bank, Reuters said.

Eurozone members of the Group of 20 major economies are expected to declare their commitment to "take all necessary policy measures" to ensure that the euro stays intact and to bolster confidence, according to reports of a draft communiqué from the G-20 summit in Mexico.


The FTSE in London was up 1.23%, and the DAX in Germany was up 0.93%. Hong Kong's Hang Seng finished flat, and Japan's Nikkei Average fell 0.75%.


In corporate news, Microsoft (MSFT) on Monday unveiled a tablet line called Surface, which the software giant said are "PCs built to be the ultimate stage for Windows." Microsoft executives, at an event in Los Angeles, showed off "two Windows tablets and accessories that feature significant advances in industrial design and attention to detail." The product announcement puts Microsoft back into competition with Apple (AAPL) and the iPad.


Oracle (ORCL) released its fourth-quarter report early and soared past estimates as new software licenses surged 7% to $4 billion. The software company also added a hefty $10 billion to its existing buyback program.


Walgreen (WAG) said Tuesday it is buying a 45% stake in Alliance Boots for $6.7 billion. Walgreen also has the option to buy the remainder of Alliance Boots, the European health and beauty retailer.


J.C. Penney (JCP) on Monday announced the abrupt departure of Michael Francis as its president after just eight months with the retailer. A reason for Francis' resignation from J.C. Penney, which is undergoing a revamp that hasn't gone well, wasn't disclosed. A press release said CEO Ron Johnson will assume "direct responsibility and oversight of the company's marketing and merchandising functions."


More from TheStreet

Jun 19, 2012 10:18AM
Permits mean nothing because you can wait up to a year to start construction in 39 of the 50 states and even then get extensions if needed. And if construction is not started in the other states within 120 days the permit gets cancelled and you would have to reapply. Why don't the State owned Media say the number of permits that have been canceled or expired every month? Again the state owned Media only chooses to give you HALF the story. Also they do not want to tell you that the median family home size has been reduced by 150 sq feet and allowed to use much cheaper building materials. Thus making your NEW FIRST HOME the worst NEW investment EVER...! Promoting another seemingly happy economic story while the real BAD NEW FORECLOSURES RISE FOR THIRD MONTH STRAIGHT gets lost in the noise.
Jun 19, 2012 10:50AM
Monetary Easing;  This creates confidence so you and I can make our financial decisions with sound economic information.  This is but one way they increase confidence.  The Fed loans XYZ Bank  500 billion USD at .25% and you then as agreed you buy 500 Billion USD worth of Government bonds at 5%.  XYZ Bank makes 24 billion USD paid for by the US Taxpayer..  The Fed proclaims confidence because they were able to find a buyer for bonds at 5% and thusly you feel this confidence  and buy into the Market.   This is no different than  the guy who buys a hooker and then proclaims she is in love with him because she slept with him.   This is just one example of the criminal nature of Banks right now.  When the historical return on cash deposits has been 5% and we now see 1.5% what you are really seeing is a 75% tax on savings. The banks are attempting to recoup the money losses from the housing mess by taxing those that have cash with exorbinately low returns. Folks who saved and planned have had the rug and their cash ripped from them by a government who has joined with the banking system to redistribute wealth just as Obama said he would.
Jun 19, 2012 10:09AM
Stocks rise on stimulus hopes! Funny stuff
Jun 19, 2012 10:48AM
Housing data has been faked since this whole debacle started.

As for pumping the markets based on "hopes" of stimuli... what sort of strategy is that? Isn't that saying that there is no professional skill on Wall Street at all? That this has all been a big money grab disguised as institutional activity?

I am completely opposed to the Federal Reserve giving lending laundering pushing slipping any more money to the banks. NO QE, Ben.

Jun 19, 2012 11:26AM

Right now is the best time in 75 years to buy a home.

Jun 19, 2012 10:40AM
The FED will save us, or even move us in the right direction to repair the economy.  
Meanwhile the Euro is set to collapse and yet its value is still higher than our currency???  
Tells you a lot about the difference between reality and whats being reported by propaganda rags like this.
Keep up the wishful thinking guys.
Jun 19, 2012 10:32AM
We need deflation not inflation. We have fixed low wages and real unemployment of 14%. To get people spending more we need prices to go down. Inflation reduces purchasing power, just like high gas prices. We don't need more stimulus, we need to reduce the money supply. Watch the Fed create more stimulus and play to the rich. The Fed doesn't care about the American people.
Jun 19, 2012 10:42AM

"There are major consequences to incur if we do not attempt to prop up the World's Financial Structure, where we can take our(or the World's) foot off the gas pedal not really sure? IMO."

That's the problem.  And why this type of thinking is and always has been flawed.

Using borrowed funds to cover current loans you can't afford to pay back is a losing proposition.  Math is not partisan.

Jun 19, 2012 11:51AM
As bleak as the economic future is I would never suggest anyone assume any debt at this time.  As they say the devil is in the details but the devil is actually in the debt.  You see 7 or 8% interest on debt for many and with only a 1.25% return on cash we are are looking at the largest historical difference cost verus return.  When Inflation exceeds short term return on capital the writing is plane and simple.  Those that have debt will become less and less able to cover.  This is the design at this point in time.  Historical banking is now a thing of the past.  The New World Order will use Banking to redistribute monies from those that have to those that don't.  There are several good articles describing the fundamental difference between our previuos autonomous banking system versus the NEW International Banking and how politics, trade, and the socialistic frame being implanted on the world through what is called The New World Order.  Kissinger wrote a good reference article a few years back that gives a short intro as to what we can no longer expect from the old style banking system. 
Jun 19, 2012 10:13AM

Look to the Monetarily Sovereign countries that have a recent history of creating money out of thin air for similar needs.

And please don't miss the lesson that has been refused to be learned about how this is a failed concept that fixes nothing.

Jun 19, 2012 11:19AM

>>>You will never see this combination of low mortgage rates , coupled with very low pricing and good inventory to choose from again.<<<


Alias Barry Soetoro <---- for once, I agree with this guy.  Thumbs up.

Jun 19, 2012 11:43AM

1. The Feds are still in the market with their "Operation Twist", They've been in there since October of many of us long term unemployed can attest, it's not helping.


After hundreds of resumes sent, I can't even get a phone call and an interview from these automated messaging machines. Try to knock on company doors..........Ooops, sorry we don't accept resumes, you'll have to go to our automated machine and submit your resume into the black hole that only knows how to respond "after careful review of your resume (and a total lack of creative thinking on our part) we have chosen another candidate to fill the position of...... !


After 12 years of this automated crap, one would think these companies would figure out that in order to hire "really qualified candidates", a human actually has to look at resumes and use a bit of creative thinking to see where those candidates would fit into their organization.


2. The central banks in Europe are still in their pumping and dumping the markets attempting to make a profit to help pay for their bailouts of Greece, Italy, Spain, and Portugal.

Jun 19, 2012 11:03AM
JCP... I was in Penney's yesterday. Proprietary brands are dismally priced. not bad goods, really bad marketing concept. In this whole Kool-Aid drug trip called "branding" we have come full circle to a place where quality and consistency truly dictates popularity. It's a shame that this stalwart retailer went with a button presser paper pusher instead of someone who actually shops there. I hope the JCP Board decides to get sober before choosing a replacement. You can make an administrator out of a salesperson but you can't make a salesperson out of an administrator.
Jun 19, 2012 11:52AM

These so called "Economists" surveyed by Thomson Reuters should ALL be fired. Why is it that every single report that comes out, has to be rivised either upward or downward. That applies to everything from unemployment figures to housing figures to consumer confidence. This is completely unaccepable. I am sick and tired of all these revised figures and how it bounces the stock market all over the place. The solution is simple....get someone that can give us a strait answer already!!!

Jun 19, 2012 11:38AM

>>>You will never see this combination of low mortgage rates , coupled with very low pricing and good inventory to choose from again.<<<


Alias Barry Soetoro <---- for once, I agree with this guy.  Thumbs up.

Jun 19, 2012 12:16PM
"And interestingly," CBS adds, "Apparently President Obama got a bit of a lecture from Putin about some other failed transitions that are going on around the world."

Ok..... it's no shock that I'm so not a fan of many of this administrations policies, and see zero logical reason why anyone would feel obligated to give them a vote in November to have a 2nd go at it.....


If OUR BOY Obama want's to let Vladdy taste the back of his hand, or be reminded of exactly WHO HE IS TALKING TO, I will be right there to back him up!  Mr. Putin best check himself.......
Jun 19, 2012 12:14PM
Here we go again, the Fed is artifically pumping up the stock market again.  Just wait for some economic bad news, it is be a tiny pin bursting a large ballon.
Jun 19, 2012 10:02AM
this blog    always goes up on Hopes   like obame   Fair     wanna  puke
Jun 19, 2012 9:45AM

Found this interesting BRIC countries pledges to IMF

China about 45 billion$

Brazil, Russia,India about $10 billion each. And Mexico about $10 bil


Total pledges to IMF about $435 billion, man that's a lot of money...

I think Russia outta pony up a little more? They got oil..


And I just wonder where all the rest, can come from.???

Jun 19, 2012 12:18PM

Ailas Barry S


While interest rates are low for the 15 - 20 and 30 year time frame they do or say nothing to the quality of the New Home construction in today's market place. Today's constructed homes will not last 50 yrs straight and nothing in them is lasting 7 years either. The mean time for replacement of all your appliances and fixtures is 6 yrs now and some do not even last that long. This leaves just the plumbing inside the walls. This leaves remodeling as an option every 9 years but your house is not going up in value anytime soon so your left make patch job home repairs that will make your home  unappealing if not done right. The permitting cost along is ridiculous and the workmanship is some times spotty at best. Yes, rates are low figuratively speaking, but the home will not last the mortgage if you start to skimp on repairs everyone is doing right now...Wage deflation is making home owners defer repairs and regular home maintenance and if you start to have six or ten home around you go into foreclosure your sunk...into a upside down situation like 40% of americans today. So what good is a LOW COST MORTGAGE WHEN YOU HAVE ALL OF THESE FACTORS WORKING AGAINST YOU...? While mortgages are expensive in relation to what the banks are paying out and giving you for your savings and deposit accounts. New home permits is one of the easiest numbers for home builders to fake and try to stimulate a buzz.

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[BRIEFING.COM] The major averages ended the midweek session with slim gains after showing some intraday volatility in reaction to the release of the latest policy directive from the Federal Open Market Committee. The S&P 500 added 0.1%, while the relative strength among small caps sent the Russell 2000 higher by 0.3%.

Equities spent the first half of the session near their flat lines as participants stuck to the sidelines ahead of the FOMC statement, which conveyed no changes to the ... More


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