Pier 1 Imports Posts a Profit

Pier 1 Imports announced its return to profitability this week in the company's first-quarter earnings report. The company reported net income of $7.7 million for the quarter, versus net income of $29.3 million for the same period last year (which included a $47.8 million gain on the repurchase of debt and a $10 million litigation recovery).

Total sales for the first-quarter were $306.3 million, an 8.9% increase from $281.1 million one year ago. Store sales during the quarter increased by 14.3% compared to a store sales decline of 7.5% last year. Pier 1 attributed the sales increase to more in-store traffic and higher average merchandise ticket prices.

Alex W. Smith, President and Chief Executive Officer said, "We are delighted that for the first time in six years we have achieved first-quarter operating income. Our customers are clearly enjoying our merchandise, our stores and our customer service."

Pier 1 said that it experienced strong performance in all of its merchandise divisions across the country. With its reemerging profitability, company confidence is high and the company's management wants to keep the momentum going. Pier 1 says that it plans to continue to work to rebuild its profitability one sale and one customer at a time.

Pier 1 Imports (PIR) ended the week up at $7.78.

Walgreens and CVS Reach Prescription Plan Deal

Shares of Walgreens Corp. and CVS Caremark Corp. rose this week after the companies announced a deal to settle their disagreement over prescription plans. In a letter to CVS Caremark Corp. last week, Walgreen said that it would not participate as a provider in any new and renewed prescription drug plans awarded after June 7 to CVS Caremark's pharmacy benefit manager (PBM). CVS responded that it would not participate in Walgreen's prescription plan network.

On Friday, the companies announced the signing of a multi-year contract to maintain their joint pharmacy network. Under the agreement, Walgreens will continue participating in the CVS Caremark pharmacy benefit management (PBM) national retail network for existing, new or renewal plans. The companies said that they are not disclosing the financial terms of the new contract.

"We are very pleased with the outcome of this mutual, multi-year agreement that meets our business objectives," said Walgreens Executive Vice President of Pharmacy, Kermit Crawford. "The agreement makes good business sense, provides the framework we need to operate our business going forward and assures choice and convenience for the many consumers who look to us for quality pharmacy care." Per Lofberg, President of CVS Caremark's pharmacy benefit management business, said, "We are pleased to have reached a mutually agreeable solution together with Walgreens that is consistent with our top priority to provide convenient access to affordable high-quality pharmacy health care."

The companies said that the new contract will enhance network stability, eliminate any current or long-term disruption for clients or their members and allow the companies to continue to deliver cost-effective pharmacy benefits for clients. The agreement impacts thousands of participating pharmacies nationwide, including neighborhood independent pharmacies, chain pharmacies and those located in supermarkets.

Walgreens Co.(WAG) ended the week up at $30.10; CVS Caremark Co. (CVS) ended the week up at $32.44.

Freddie and Fannie to Delist from NYSE

Shares of stock for Freddie Mac and Fannie Mae fell nearly 40% this week after the government-backed mortgage companies announced their intentions to delist all common and preferred stock from the New York Stock Exchange (NYSE). The delisting came at the direction of the Federal Housing Finance Agency (FHFA), which is acting as conservator of both companies' assets.

Freddie Mac said that it anticipates that the delisting of its common and preferred stock from the NYSE, will be effective on or about July 8, 2010, 10 days after Freddie Mac files Form 25 with the SEC. After the delisting of its equity securities from the NYSE, Freddie Mac expects that its common stock and the classes of preferred stock that were previously listed on the NYSE will be traded in the over-the-counter market.

Fannie Mae said that the decision to delist was made in response to a notification by the NYSE on June 15, 2010 that the company no longer met NYSE continued listing standards relating to the minimum price of Fannie Mae's common stock. Fannie Mae anticipates that its delisting will take place approximately 10 days after June 28 when it plans to file with the SEC.

Both companies were placed in government conservatorship following the housing market crash of 2008. As part of the conservatorship, the Treasury Department is providing Freddie and Fannie with funds, as needed, to cover deficits. The move to trade in the over-the-counter-market will not affect either company's obligation to file periodic reports with the SEC.

Freddie Mac (FRE) ended the week up at $0.42; Fannie Mae (FNM) ended the week up at $0.36.

The Dow started the week at 10,211 and ended at 10,451. The S&P 500 started the week at 1,092 and ended at 1,118. The NASDAQ started the week at 2,244 and finished at 2,310.

Treasury Yields Drop on Jobless Claims

Treasury yields fell this week following an unexpected increase in claims for jobless benefits. The Labor Department reported jobless claims rising by 12,000 to 472,000. Economists suggested that the rise in claims shows continued weakness in the U.S. labor market.

In other data reports, the consumer price index (CPI) declined this week for the second month in a row. The Labor Department attributed some of the decline to the fall in gasoline prices. Food and lodging prices rose by 0.1%, while energy prices fell by 2.9%. Core CPI, which measures prices excluding food and energy prices, rose by 0.1%.

The Conference Board Index, which measures U.S. economic growth, reported slower growth for the remainder of the year. The Conference Board's Index slowed to 3.9% in May, which is the lowest that it has been in six months. While the index actually rose 0.4% in May, economists polled by Marketwatch.com anticipated a 0.7% increase.

The Philadelphia Federal Reserve Bank Index, which measures manufacturing activity in the Philadelphia region, fell from 21.4 in May to 8.0 in June. The data confirmed reports suggesting that the U.S. economy will experience slower growth for 2010. While the economy is in recovery, economists say that it will take time for the employment market and some industries to bounce back from the recession.

The 10-year Treasury note yield began at 3.23% and ended at 3.22%. The 30-year Treasury note yield began at 4.15% and finished at 4.14%.

Little Change in Mortgage Rates

Freddie Mac reported little change in mortgage rates this week. The 30-year fixed-rate mortgage (FRM) averaged 4.75%, up from last week when it averaged 4.72%. Last year at this time, the 30-year FRM averaged 5.38%.

The 15-year FRM this week averaged 4.20%, up from last week when it averaged 4.17%. One year ago at this time, the 15-year FRM averaged 4.89%.

"Mortgage rates were little changed this week amid preliminary signs that the expiration of the homebuyer tax credit in April may have led to a slowdown in new construction," said Frank Nothaft, Freddie Mac Vice President and Chief Economist. "Starts on single-family homes fell 17% to an annualized pace of 468,000 units in May from April's 20-month high."

In addition, the recent National Association of Home Builders/Wells Fargo Housing Market Index showed that builders became more pessimistic in June about the short-term outlook for home building. Despite this news, the Federal Reserve has reported an improvement in household balance sheets as home owners regain home equity.

The money market fund finished this week at 0.77%. The 1-year CD finished at 1.14%.

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