Spooked by higher interest rates and troubles in the subprime residential mortgage market, commercial real estate investors and lenders are rethinking some deals that would have sailed through just six months ago.
"There has definitely been a readjustment," said Marc Schnitzer, chief executive of Centerline Capital Group, a subsidiary of Centerline Holding Co.
"The investors who are buying a lot of the CDOs (collateralized debt obligations), investors that are buying a lot of the CMBS (commercial mortgage-backed securities), have started to push back on some of the more aggressive deal terms," he said this week at the Reuters Global Real Estate Summit in New York.
The meteoric rise of real estate prices over the past few years allowed investors to finance, in some cases, more than 90 percent of their acquisitions using borrowed money, such as mortgages, mezzanine debt and bridge loans.
Much of that debt was then used by investment banks and others to back securities sold to pension funds, university endowments and other institutional investors. The money raised was then recycled back to make more loans.
Such loans would fund purchases of individual properties and large real estate portfolios, such as Blackstone Group LP's $23 billion acquisition in February of Equity Office.
The issue of risk, and investors who assume it by purchasing the loans and securities, came under scrutiny in the winter as residential mortgage defaults spiked.
While commercial real estate has not seen the sort of rise in foreclosures the residential market has, lenders and CMBS investors have demanded either to be paid more for risk or that issuers get rid of some of the riskier loans they are selling.
In one deal in April that Schnitzer termed "notorious," issuers of a CMBS -- GE Commercial Mortgage Trust 2007-C1 -- reconstituted it after investors balked at some of the loans. The deal, initially announced at $4.23 billion, closed at $3.95 billion.
"Some loans had to be taken out," Schnitzer said. "Investors tapped on the brakes and pushed back, saying we need higher returns. Makers of CMBS are less certain of how to price things these days."
Colin Dyer, CEO of leading real estate services firm Jones Lang LaSalle Inc. , said the market shift gave potential bidders a chance "to pause or to find the math doesn't work any more, and so in some cases we've seen just a reduction in the number of bidders interested in parcels or individual assets."
However, real estate prices remain healthy, experts said, with rents strong and the supply of new buildings for the most part restrained in the United States.
"We continue to believe in the fundamentals of U.S. real estate -- increasing rents and increasing occupancy," said Joseph Parsons, president of GE Real Estate North American Equity.
GE Real Estate, a unit of General Electric Co. has about $60 billion invested in global real estate either through debt or ownership. In North America, it has $14 billion of equity invested and $17.5 billion in real estate lending.
"This irresistible force, which is the amount of money trying to get into real estate, is still present," Jones Lang's Dyer said. "For every $1 that gets done there are $5 trying to do the deal."
What is expected to change are some of the players. As the debt-heavy buyers leave the market or become less active, those, such as pension funds and foreign buyers who do not use as much debt, are expected to pick up the slack.
"Those groups have been pleased with the fact that there is less competition for assets," Dyer said. "They're able to get an easier run at assets."
sâmbătă, 30 iunie 2007
joi, 28 iunie 2007
Oil steadies above $70 after stock drop
Oil steadied above $70 a barrel on Thursday after a surprisingly steep decline in U.S. gasoline stocks revived supply worries during the height of the summer driving season.
London Brent crude ,now a better gauge of global prices than U.S. oil, was up 3 cents at $70.56 a barrel by 0902 GMT, after rising 35 cents on Wednesday.
U.S. crude gained 13 cents to $69.10 a barrel, following an overnight spike of $1.20.
Gasoline inventories in the world's top consumer fell by 700,000 barrels last week, against an expected rise of 1.2 million barrels, government data showed on Wednesday.
Distillate stocks, which include heating oil, fell by 2.3 million barrels, deepening a year-on-year deficit.
Price gains were tempered by rising stockpiles of crude oil -- which hit a fresh nine-year high -- and higher operating rates at U.S. refiners.
"The fall in gasoline stocks is due mainly to a lack of imports, not domestic production, which has been ramping up," said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia.
"With the refineries coming back online, it seems unlikely that the inventories will keep falling."
Longer-term supplies could be affected by the exits of U.S. majors Exxon Mobil Corp. and ConocoPhillips from Venezuela after the government decided to nationalize the companies' multi-billion dollar oil projects.
Analysts said the move might lead to falling production in the OPEC member, which is the fourth-largest supplier to the United States, due to a loss of foreign capital and expertise.
London Brent crude ,now a better gauge of global prices than U.S. oil, was up 3 cents at $70.56 a barrel by 0902 GMT, after rising 35 cents on Wednesday.
U.S. crude gained 13 cents to $69.10 a barrel, following an overnight spike of $1.20.
Gasoline inventories in the world's top consumer fell by 700,000 barrels last week, against an expected rise of 1.2 million barrels, government data showed on Wednesday.
Distillate stocks, which include heating oil, fell by 2.3 million barrels, deepening a year-on-year deficit.
Price gains were tempered by rising stockpiles of crude oil -- which hit a fresh nine-year high -- and higher operating rates at U.S. refiners.
"The fall in gasoline stocks is due mainly to a lack of imports, not domestic production, which has been ramping up," said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia.
"With the refineries coming back online, it seems unlikely that the inventories will keep falling."
Longer-term supplies could be affected by the exits of U.S. majors Exxon Mobil Corp. and ConocoPhillips from Venezuela after the government decided to nationalize the companies' multi-billion dollar oil projects.
Analysts said the move might lead to falling production in the OPEC member, which is the fourth-largest supplier to the United States, due to a loss of foreign capital and expertise.
vineri, 22 iunie 2007
Senate approves new auto fuel standards
The Senate approved a proposal on Thursday that would for the first time in 30 years force sharp increases in auto fuel standards and impose other measures to make vehicles more efficient and cut dependence on imported oil.
In a surprise voice vote, senators approved a compromise amendment that would require an improvement in the average efficiency of the new U.S. vehicle fleet from 25 miles per gallon now to 35 mpg by 2020, about a 4 percent annual increase.
"If we're really smart, we'll find a way to make this new approach to fuel efficiency work -- to make it work for domestic auto companies, their shareholders, their employees and our nation to reduce our dependence on foreign oil," said Sen. Thomas Carper, a Delaware Democrat and co-sponsor of the compromise plan.
Industry officials bristled privately at the description of the final Senate initiative as a compromise, but major auto companies had no immediate comment on the proposed change in Corporate Average Fuel Economy and other mandates, which would also reduce carbon emissions if it is enacted into law.
The energy bill cleared the chamber late on Thursday night.
Auto companies have said a strict efficiency requirement could financially devastate struggling Detroit manufacturers, including General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group.
But lawmakers said provisions in the fuel amendment were achievable.
"It will not do damage to the industry. It will not take away your pickup truck," said Sen. Byron Dorgan, a North Dakota Democrat.
Joan Claybrook, president of Consumer Group Public Citizen and a former head of the agency that administers CAFE rules, called the measure a "step backward" because it would give regulators and industry too much discretion on how to achieve mileage targets. The Consumer Federation of America praised the bill, saying it will cut oil imports by 15 percent and reduce tailpipe emissions by 1 billion tons.
Key Democrats, including Dianne Feinstein of California, Carper, and John Kerry of Massachusetts, negotiated with key Republicans, such as Ted Stevens of Alaska and Olympia Snowe of Maine, to craft several changes from their original fuels proposal, which was stricter.
Under their compromise, lawmakers would leave it up to transportation regulators to determine the maximum feasible standards under the federal CAFE program, beginning with model year 2011 vehicles.
Automakers lobbied against a specific CAFE target but proponents of tougher rules, including some environmentalists, say there are few near-term alternatives to the 1970s-era program for gasoline engines to achieve meaningful fuel savings.
The Senate plan also puts sharper focus on accelerated development of gasoline-electric hybrids, electric vehicles or those that run on a mix of gasoline and alternative fuels, such as ethanol, to help industry achieve the 2020 target.
To that end, the Senate compromise would require the Transportation Department to develop a plan to ensure that 50 percent of vehicles sold in the United States are capable of running on gasoline alternatives by 2015, but only if those products are available and affordable.
The original Senate bill would have required the industry to achieve an additional 4 percent in annual fuel economy gains after 2020, but the compromise permits regulators to determine what additional targets would be feasible.
The Senate bill would require a fleetwide average of 35 mpg by 2020 but some vehicles, like sedans, would continue to perform more efficiently than larger sports utilities, pickups and vans.
Annual goals would be set for each vehicle class -- cars and light trucks, which include sport utilities and pickups -- based on size and weight.
The change could force manufacturers to make uncomfortable decisions about their products, a particularly troubling prospect for U.S.-based manufacturers that have relied on sales of bigger, less-efficient light trucks.
An energy bill in the House of Representatives is moving forward without vehicle fuel economy changes.
In a surprise voice vote, senators approved a compromise amendment that would require an improvement in the average efficiency of the new U.S. vehicle fleet from 25 miles per gallon now to 35 mpg by 2020, about a 4 percent annual increase.
"If we're really smart, we'll find a way to make this new approach to fuel efficiency work -- to make it work for domestic auto companies, their shareholders, their employees and our nation to reduce our dependence on foreign oil," said Sen. Thomas Carper, a Delaware Democrat and co-sponsor of the compromise plan.
Industry officials bristled privately at the description of the final Senate initiative as a compromise, but major auto companies had no immediate comment on the proposed change in Corporate Average Fuel Economy and other mandates, which would also reduce carbon emissions if it is enacted into law.
The energy bill cleared the chamber late on Thursday night.
Auto companies have said a strict efficiency requirement could financially devastate struggling Detroit manufacturers, including General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group.
But lawmakers said provisions in the fuel amendment were achievable.
"It will not do damage to the industry. It will not take away your pickup truck," said Sen. Byron Dorgan, a North Dakota Democrat.
Joan Claybrook, president of Consumer Group Public Citizen and a former head of the agency that administers CAFE rules, called the measure a "step backward" because it would give regulators and industry too much discretion on how to achieve mileage targets. The Consumer Federation of America praised the bill, saying it will cut oil imports by 15 percent and reduce tailpipe emissions by 1 billion tons.
Key Democrats, including Dianne Feinstein of California, Carper, and John Kerry of Massachusetts, negotiated with key Republicans, such as Ted Stevens of Alaska and Olympia Snowe of Maine, to craft several changes from their original fuels proposal, which was stricter.
Under their compromise, lawmakers would leave it up to transportation regulators to determine the maximum feasible standards under the federal CAFE program, beginning with model year 2011 vehicles.
Automakers lobbied against a specific CAFE target but proponents of tougher rules, including some environmentalists, say there are few near-term alternatives to the 1970s-era program for gasoline engines to achieve meaningful fuel savings.
The Senate plan also puts sharper focus on accelerated development of gasoline-electric hybrids, electric vehicles or those that run on a mix of gasoline and alternative fuels, such as ethanol, to help industry achieve the 2020 target.
To that end, the Senate compromise would require the Transportation Department to develop a plan to ensure that 50 percent of vehicles sold in the United States are capable of running on gasoline alternatives by 2015, but only if those products are available and affordable.
The original Senate bill would have required the industry to achieve an additional 4 percent in annual fuel economy gains after 2020, but the compromise permits regulators to determine what additional targets would be feasible.
The Senate bill would require a fleetwide average of 35 mpg by 2020 but some vehicles, like sedans, would continue to perform more efficiently than larger sports utilities, pickups and vans.
Annual goals would be set for each vehicle class -- cars and light trucks, which include sport utilities and pickups -- based on size and weight.
The change could force manufacturers to make uncomfortable decisions about their products, a particularly troubling prospect for U.S.-based manufacturers that have relied on sales of bigger, less-efficient light trucks.
An energy bill in the House of Representatives is moving forward without vehicle fuel economy changes.
marți, 19 iunie 2007
The dollar slipped against most major currencies on Tuesday as U.S. bond yields continued to retreat from five-year highs hit last week, eroding their appeal to foreign investors.
At the same time, the euro retreated from a record peak against the yen and treaded water against the dollar after a surprise decline in German business confidence in June.
In recent weeks, the dollar has closely tracked Treasury yields, hitching a ride higher as strong U.S. economic data boosted the benchmark 10-year yield to 5.33 percent and sent the euro to a near-three-month trough against the greenback.
But with little major U.S. economic data on tap this week to guide traders, an ongoing bond market retracement has curbed dollar gains and weakened the case for the Federal Reserve to boost interest rates in 2007.
"We have a light calendar this week and there's no real catalyst providing a fresh reason to buy dollars," said Bank of New York strategist Michael Woolfolk. That leaves "significant gyrations in bond prices" to lead some of the price action, he said.
Higher U.S. Treasury yields imply higher interest rates and tend to attract return-hungry investors into U.S. assets.
But in recent days, the spread of the implied U.S. interest rate in December 2008 over the euro zone's has narrowed to around 60 basis points from 70 basis points last week, according to the futures market.
On Tuesday, the dollar fell 0.2 percent to 123.40 yen and also fell 0.3 against sterling to $1.9885 per pound.
The euro was among the few currencies unable to gain on the greenback, trading flat at $1.3415 after Germany's ZEW business sentiment index unexpectedly fell in June.
The euro also fell 0.2 percent to 165.52 yen after earlier hitting a record peak above 166 yen.
Traders said price action was mostly centered on cross rates in which investors sold the euro against sterling and yen.
Markets are still expecting at least two more interest rate hikes from the European Central Bank this year, while the Fed is seen leaving rates steady at 5.25 percent for 2007.
"The euro wants to trade higher but can't because of selling pressure in euro/yen," said Brian Dolan, head of research at Forex.com in Bedminster, New Jersey.
Despite the yen's mild rise on Tuesday, market sentiment remained positioned against the currency as investors continued to borrow it at low Japanese interest rates in order to buy higher-yielding currencies.
Hiroshi Watanabe, Japan's vice finance minister, said Tuesday he was watching speculative yen carry trades carefully but said they do not as yet pose a risk to Japan's economy.
BOND BREAKDOWN AHEAD?
Bank of New York's Woolfolk, however, said it would be a mistake to expect yields and the dollar to march in lock-step indefinitely and said there are other reasons for dollar weakness as well, including a push higher in oil prices.
Indeed, commodity currencies such as the Canadian and New Zealand dollars have been among the biggest gainers on the day.
"We should not confuse correlation with causation," he said.
At the same time, the euro retreated from a record peak against the yen and treaded water against the dollar after a surprise decline in German business confidence in June.
In recent weeks, the dollar has closely tracked Treasury yields, hitching a ride higher as strong U.S. economic data boosted the benchmark 10-year yield to 5.33 percent and sent the euro to a near-three-month trough against the greenback.
But with little major U.S. economic data on tap this week to guide traders, an ongoing bond market retracement has curbed dollar gains and weakened the case for the Federal Reserve to boost interest rates in 2007.
"We have a light calendar this week and there's no real catalyst providing a fresh reason to buy dollars," said Bank of New York strategist Michael Woolfolk. That leaves "significant gyrations in bond prices" to lead some of the price action, he said.
Higher U.S. Treasury yields imply higher interest rates and tend to attract return-hungry investors into U.S. assets.
But in recent days, the spread of the implied U.S. interest rate in December 2008 over the euro zone's has narrowed to around 60 basis points from 70 basis points last week, according to the futures market.
On Tuesday, the dollar fell 0.2 percent to 123.40 yen
The euro was among the few currencies unable to gain on the greenback, trading flat at $1.3415
The euro also fell 0.2 percent to 165.52 yen
Traders said price action was mostly centered on cross rates in which investors sold the euro against sterling and yen.
Markets are still expecting at least two more interest rate hikes from the European Central Bank this year, while the Fed is seen leaving rates steady at 5.25 percent for 2007.
"The euro wants to trade higher but can't because of selling pressure in euro/yen," said Brian Dolan, head of research at Forex.com in Bedminster, New Jersey.
Despite the yen's mild rise on Tuesday, market sentiment remained positioned against the currency as investors continued to borrow it at low Japanese interest rates in order to buy higher-yielding currencies.
Hiroshi Watanabe, Japan's vice finance minister, said Tuesday he was watching speculative yen carry trades carefully but said they do not as yet pose a risk to Japan's economy.
BOND BREAKDOWN AHEAD?
Bank of New York's Woolfolk, however, said it would be a mistake to expect yields and the dollar to march in lock-step indefinitely and said there are other reasons for dollar weakness as well, including a push higher in oil prices.
Indeed, commodity currencies such as the Canadian
"We should not confuse correlation with causation," he said.
duminică, 17 iunie 2007
Retailers, consumer companies search for growth
Bigger is becoming better.
After years of operating in their comfort zones, retailers and consumer product makers are branching out to find faster pockets of growth. Some are beefing up through acquisitions, while others dive deeper into developing markets, where growth outpaces that of the mature markets of North America.
Meanwhile U.S. consumers face rising costs for everything from gasoline to milk which, along with a tough housing market, is curbing their spending and putting pressure on the manufacturers and retailers vying for shoppers' attention during the upcoming back-to-school and holiday shopping seasons.
Industry executives set to attend the Reuters Consumer and Retail Summit next week have grappled with issues such as higher gasoline prices for some time. But these days, pressure is fierce and being heightened by higher costs for labor and key commodities like corn, making food and other goods more expensive. Retail and consumer stocks have paid the price.
The Standard & Poor's Retailing Industry Group Index gained nearly 15 percent over the past year, while the S&P Consumer Staples Sector Index gained 16 percent. By contrast, the Standard & Poor's 500 Index added about 22 percent.
"The countryside is littered with the bodies of economists who predicted the demise of the American consumer -- it hasn't happened yet," Ritholtz Research and Analytics' chief market strategist Barry Ritholtz said in an interview with Reuters Television. But "we see signs that they are starting to tire."
Wal-Mart Stores Inc. , the world's largest retailer, has said it saw shopper worries about gas prices increase in the beginning of the year and is cautious about June sales. Wal-Mart's sales at U.S. stores open at least a year rose just 1.1 percent last month, excluding fuel.
On the other side of the spectrum Saks Inc. , which caters to wealthy consumers, posted a 37.5 percent jump in May same-store sales, driven by items such as women's designer sportswear, handbags and shoes. Still, some of the gains at Saks stemmed from a shift in its promotional calendar, so same-store sales are expected to fall in June.
LOOKING ABROAD
As U.S. companies work through such issues at home they are expanding their international operations. Consumer products makers like leader Procter & Gamble Co. have seen rapid growth in areas such as Eastern Europe and Latin America. But it can be harder to expand in such markets since companies must often sell through distributors to reach multiple stores, rather than selling directly to a retailer like Wal-Mart.
"In terms of global retailing, the importance of emerging markets is kind of the big thing at this moment," said Matthew Stych, director of retail research for Euromonitor International, stressing the BRIC countries: Brazil, Russia, India and China.
"(BRIC countries) are where the growth is going to be," said Ritholtz. "You have well over a billion people in India and over a billion-and-a-half people in China and a lot of these people for the first time in history (are) moving into the middle class. That means things like computers and laptops and cell phones and even iPods."
Stych also said as retailers try to expand into new markets, nonfood retailers like Ikea, Best Buy Co. Inc. and Home Depot Inc. might have a good chance, because it is easier to copy their stores from one market to another.
"Food and drink are local tastes. Non-grocery can replicate the model" in another market.
But Tesco Plc. , Britain's largest food retailer, is getting ready to test that theory as it prepares to bring a fresh convenience store concept to the United States later this year, adding pressure to traditional U.S. food sellers.
Tesco's small Fresh & Easy Neighborhood Markets will focus on ready-to-eat meals and fresh and environmentally friendly products, hoping to capitalize on consumers' desire for what is new, convenient and higher-end. Manufacturers including Playtex Products Inc. , Whirlpool Corp. and Jarden Corp. are hoping to do the same.
Other European retailers, from France's PPR to Germany's KarstadtQuelle and Britain's DSG International are also pushing the boundaries of traditional retailing, linking the Internet, catalogs, mobile phones and stores as they strive to satisfy consumers' desire to shop where they want, whenever they want.
Meanwhile, the green agenda is forcing all retailers into new spaces from rethinking their distribution to whether they should stop giving away plastic bags.
After years of operating in their comfort zones, retailers and consumer product makers are branching out to find faster pockets of growth. Some are beefing up through acquisitions, while others dive deeper into developing markets, where growth outpaces that of the mature markets of North America.
Meanwhile U.S. consumers face rising costs for everything from gasoline to milk which, along with a tough housing market, is curbing their spending and putting pressure on the manufacturers and retailers vying for shoppers' attention during the upcoming back-to-school and holiday shopping seasons.
Industry executives set to attend the Reuters Consumer and Retail Summit next week have grappled with issues such as higher gasoline prices for some time. But these days, pressure is fierce and being heightened by higher costs for labor and key commodities like corn, making food and other goods more expensive. Retail and consumer stocks have paid the price.
The Standard & Poor's Retailing Industry Group Index gained nearly 15 percent over the past year, while the S&P Consumer Staples Sector Index gained 16 percent. By contrast, the Standard & Poor's 500 Index added about 22 percent.
"The countryside is littered with the bodies of economists who predicted the demise of the American consumer -- it hasn't happened yet," Ritholtz Research and Analytics' chief market strategist Barry Ritholtz said in an interview with Reuters Television. But "we see signs that they are starting to tire."
Wal-Mart Stores Inc. , the world's largest retailer, has said it saw shopper worries about gas prices increase in the beginning of the year and is cautious about June sales. Wal-Mart's sales at U.S. stores open at least a year rose just 1.1 percent last month, excluding fuel.
On the other side of the spectrum Saks Inc. , which caters to wealthy consumers, posted a 37.5 percent jump in May same-store sales, driven by items such as women's designer sportswear, handbags and shoes. Still, some of the gains at Saks stemmed from a shift in its promotional calendar, so same-store sales are expected to fall in June.
LOOKING ABROAD
As U.S. companies work through such issues at home they are expanding their international operations. Consumer products makers like leader Procter & Gamble Co. have seen rapid growth in areas such as Eastern Europe and Latin America. But it can be harder to expand in such markets since companies must often sell through distributors to reach multiple stores, rather than selling directly to a retailer like Wal-Mart.
"In terms of global retailing, the importance of emerging markets is kind of the big thing at this moment," said Matthew Stych, director of retail research for Euromonitor International, stressing the BRIC countries: Brazil, Russia, India and China.
"(BRIC countries) are where the growth is going to be," said Ritholtz. "You have well over a billion people in India and over a billion-and-a-half people in China and a lot of these people for the first time in history (are) moving into the middle class. That means things like computers and laptops and cell phones and even iPods."
Stych also said as retailers try to expand into new markets, nonfood retailers like Ikea, Best Buy Co. Inc. and Home Depot Inc. might have a good chance, because it is easier to copy their stores from one market to another.
"Food and drink are local tastes. Non-grocery can replicate the model" in another market.
But Tesco Plc. , Britain's largest food retailer, is getting ready to test that theory as it prepares to bring a fresh convenience store concept to the United States later this year, adding pressure to traditional U.S. food sellers.
Tesco's small Fresh & Easy Neighborhood Markets will focus on ready-to-eat meals and fresh and environmentally friendly products, hoping to capitalize on consumers' desire for what is new, convenient and higher-end. Manufacturers including Playtex Products Inc. , Whirlpool Corp. and Jarden Corp. are hoping to do the same.
Other European retailers, from France's PPR to Germany's KarstadtQuelle and Britain's DSG International are also pushing the boundaries of traditional retailing, linking the Internet, catalogs, mobile phones and stores as they strive to satisfy consumers' desire to shop where they want, whenever they want.
Meanwhile, the green agenda is forcing all retailers into new spaces from rethinking their distribution to whether they should stop giving away plastic bags.
sâmbătă, 16 iunie 2007
Stronger earnings outlook may lift stocks
Signs of an improving economy may have dashed hopes for an interest-rate cut, but the potential for better profits may whet the appetite of stock market investors.
If corporations signal that business conditions are looking better for the rest of the year, analysts probably will ratchet up earnings forecasts for the second half.
"Those earnings are going to come in better than we thought, we just don't know by how much," said Carol R. Miller, senior vice president and senior portfolio manager at Federated Investors in Pittsburgh.
The latest data from Reuters Estimates has analysts forecasting a rise of 4.6 percent year-over-year for Standard & Poor's 500 earnings in the third quarter, and 8.4 percent in the fourth quarter.
With the end of the second quarter just two weeks away, earnings may well be on the minds of stock market investors in a week that is very light on economic data.
While stocks have been bouncing back from their recent drubbing, bond yields have remained above 5 percent. Bond yields and bond prices move in the opposite direction.
Bonds were spooked by concerns about inflation heating up, but two reports this week showed core producer prices and core consumer prices behaving well. In fact, the core Consumer Price Index, which excludes volatile food and energy prices, was up by a less-than-expected 0.1 percent in May.
While bond yields have remained above 5.1 percent, stocks have been on the rebound.
For the week, the Dow Jones industrial average gained 1.6 percent, the broad Standard & Poor's 500 index rose 1.7 percent, and the Nasdaq Composite Index climbed 2.1 percent. Stocks scored big gains on Wednesday after the government reported unexpectedly strong retail sales for May.
For the year so far, the Dow is up 9.44 percent, the S&P 500 is up 8.08 percent and the Nasdaq is up 8.75 percent.
HOUSING DATA LOOMS
Data in the coming week includes a couple of reports on housing, certainly an area that has been a major concern to Wall Street as activity remains depressed and stocks of home builders suffer.
On Monday, the National Association of Home Builders is set to report its NAHB/Wells Fargo Housing Market index, which measures confidence of home builders. The June reading is expected to come in at 30, unchanged from May, according to the median forecast of economists surveyed by Reuters.
On Tuesday, the Commerce Department issues data on home construction and building permits for May. The survey shows housing starts falling to an annual pace of 1.480 million units from 1.528 million in April.
Building permits are expected to pick up a bit to an annual pace of 1.471 million units from a revised 1.457 million for April.
Miller said weak housing numbers are already factored into analysts' economic models.
"They're not going to be good and we all know that," she said.
Thursday brings a report on leading economic indicators and another on regional manufacturing activity, as well as weekly jobless claims. The Conference Board, a private research group, is expected to report a 0.3 percent increase in the index of leading U.S. economic indicators for May, after a drop of 0.5 percent in April.
The Philadelphia Federal Reserve Bank will report on its index of factory activity in the U.S. Mid-Atlantic region. The index is expected to rise to 7.0 in June from 4.2 in May.
Readings above zero indicate growth in the manufacturing sector. The index has been above zero for five consecutive months.
CIRCUIT CITY, BEST BUY EARNINGS DUE
The week's calendar of corporate earnings remains light until the second quarter ends on June 30. Highlights this week include a couple of reports from big electronics retailers. Best Buy Co. Inc. is scheduled to report results on Tuesday and the quarterly numbers from Circuit City Stores Inc. are due on Wednesday.
Best Buy is expected to report higher earnings compared with a year earlier, while Circuit City is expected to report a loss. Circuit City, in the midst of a turnaround effort, recently announced a reduction in its headquarters staff and the redeployment of store managers.
FedEx Corp. , the parent of FedEx Express Corp., the world's largest express delivery business, and investment bank Morgan Stanley are set to report earnings on Wednesday as well.
In addition to the usual menu of economic statistics and corporate announcements, investors will be watching for deal activity, particularly those where the buyers are the private equity firms that have emerged as big players.
J.J. Burns, president and founder of wealth management firm J.J. Burns & Co. LLC in Melville, New York, notes that an effort is under way in the U.S. Senate to raise the tax rate for private equity firms that go public.
"We could see some pauses in the market" if anything happens to slow down the number of deals, Burns said.
If corporations signal that business conditions are looking better for the rest of the year, analysts probably will ratchet up earnings forecasts for the second half.
"Those earnings are going to come in better than we thought, we just don't know by how much," said Carol R. Miller, senior vice president and senior portfolio manager at Federated Investors in Pittsburgh.
The latest data from Reuters Estimates has analysts forecasting a rise of 4.6 percent year-over-year for Standard & Poor's 500 earnings in the third quarter, and 8.4 percent in the fourth quarter.
With the end of the second quarter just two weeks away, earnings may well be on the minds of stock market investors in a week that is very light on economic data.
While stocks have been bouncing back from their recent drubbing, bond yields have remained above 5 percent. Bond yields and bond prices move in the opposite direction.
Bonds were spooked by concerns about inflation heating up, but two reports this week showed core producer prices and core consumer prices behaving well. In fact, the core Consumer Price Index, which excludes volatile food and energy prices, was up by a less-than-expected 0.1 percent in May.
While bond yields have remained above 5.1 percent, stocks have been on the rebound.
For the week, the Dow Jones industrial average gained 1.6 percent, the broad Standard & Poor's 500 index rose 1.7 percent, and the Nasdaq Composite Index climbed 2.1 percent. Stocks scored big gains on Wednesday after the government reported unexpectedly strong retail sales for May.
For the year so far, the Dow is up 9.44 percent, the S&P 500 is up 8.08 percent and the Nasdaq is up 8.75 percent.
HOUSING DATA LOOMS
Data in the coming week includes a couple of reports on housing, certainly an area that has been a major concern to Wall Street as activity remains depressed and stocks of home builders suffer.
On Monday, the National Association of Home Builders is set to report its NAHB/Wells Fargo Housing Market index, which measures confidence of home builders. The June reading is expected to come in at 30, unchanged from May, according to the median forecast of economists surveyed by Reuters.
On Tuesday, the Commerce Department issues data on home construction and building permits for May. The survey shows housing starts falling to an annual pace of 1.480 million units from 1.528 million in April.
Building permits are expected to pick up a bit to an annual pace of 1.471 million units from a revised 1.457 million for April.
Miller said weak housing numbers are already factored into analysts' economic models.
"They're not going to be good and we all know that," she said.
Thursday brings a report on leading economic indicators and another on regional manufacturing activity, as well as weekly jobless claims. The Conference Board, a private research group, is expected to report a 0.3 percent increase in the index of leading U.S. economic indicators for May, after a drop of 0.5 percent in April.
The Philadelphia Federal Reserve Bank will report on its index of factory activity in the U.S. Mid-Atlantic region. The index is expected to rise to 7.0 in June from 4.2 in May.
Readings above zero indicate growth in the manufacturing sector. The index has been above zero for five consecutive months.
CIRCUIT CITY, BEST BUY EARNINGS DUE
The week's calendar of corporate earnings remains light until the second quarter ends on June 30. Highlights this week include a couple of reports from big electronics retailers. Best Buy Co. Inc. is scheduled to report results on Tuesday and the quarterly numbers from Circuit City Stores Inc. are due on Wednesday.
Best Buy is expected to report higher earnings compared with a year earlier, while Circuit City is expected to report a loss. Circuit City, in the midst of a turnaround effort, recently announced a reduction in its headquarters staff and the redeployment of store managers.
FedEx Corp. , the parent of FedEx Express Corp., the world's largest express delivery business, and investment bank Morgan Stanley are set to report earnings on Wednesday as well.
In addition to the usual menu of economic statistics and corporate announcements, investors will be watching for deal activity, particularly those where the buyers are the private equity firms that have emerged as big players.
J.J. Burns, president and founder of wealth management firm J.J. Burns & Co. LLC in Melville, New York, notes that an effort is under way in the U.S. Senate to raise the tax rate for private equity firms that go public.
"We could see some pauses in the market" if anything happens to slow down the number of deals, Burns said.
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