Tuesday, March 27, 2007

Morning Market Comment

Consumer Confidence data comes our way at 10:00 this morning. A drop of a little more than 5 points is expected. I'm not ruling out a bigger than expected drop, though the Conference Board does the bulk of the survery earlier in the month (obviously since its a March survey out on March 27th) so certainly the stock market jitters would have been captured, but perhaps not the snowballing impact of subprime. We'll see. These numbers are also greatly impacted by the health of the labor market and with official stats still showing "low" overall unemployment, we'll also have to see how long it takes for the Conference Board's index to fall below the 100 level.

Late last night Target put out a pre-recorded message saying it will meet its goal for March same store sales to rise by a hefty 11 to 13%. Target had predicted the big March gains due to early April arrival of Easter. Strong retail sales in March will be vital in pumping GDP figures for the first quarter, especially since it's looking like consumer spending as of January and February is running at a little over 1% annualized in real terms (when adjusted for inflation).

Lennar, the home builder, reported this morning. Quote of the day from the company's CEO: "While some markets are performing better than others, the typically stronger spring selling season has not yet materialized." This is running exactly as I've been expecting. Even at the non profit that I'm treasurer of the board tried to take a property we were selling late last fall off the market in order to wait for the strong spring selling season. I urged them not to do it expecting this type of weak spring scenario. Fortunately they kept the property on the market and we sold it. My theory remains that folks who took their homes off the market during winter will flood the market with additional inventory as spring progresses only hobbling the real estate market further. As for Lennar - it is just amazing how they managed to match Wall Street estimates with a profit of 43-cents and managed to modestly beat on the top line with $2.79 bln in revenue - which is why I opted not to buy the puts yesterday. The games are amazing with these home builders. But at least this time around, Lennar management had the decency NOT to issue guidance and withdrew its 2007 forecast.

Later today: Regulators face grilling over the subprime debacle.

DaimlerChrysler shares are on the rise this morning. Private equity groups lining up backing for Chrysler bid: Detroit News

Soros holds 6.4 pct AudioCodes stake--SEC filing.

Pete Stolcer's OneOption.com has a full list of movers this morning.

If you're in the hedge fund industry, HedgeFunds Weblog has some warm thoughts.

I'll have a look at some Wall Street analyst comments a little later.

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