Home Builder Woes Continue

With sales of homes plummeting at the expiration of the homebuyer tax credit, it comes as no surprise that homebuilders are feeling the heat. Shares of the Lennar Corporation fell after the Miami, Florida based company announced a 9% drop in its second quarter revenue to $814.5 million. Despite missing their average of $835.5 million, Lennar managed to produce a profit of $0.21 per share. The housing industry has suffered through a 10% year over year drop in home orders, according to Lennar. Yet executives remain optimistic about the prospect of a turnaround in late 2010. Lennar's CEO, Stuart Miller, said he expects "the markets to improve in the second half of 2010."

KB Home lost $0.70 per share in Friday morning trading despite reporting a smaller than anticipated loss in its second quarter earnings. The Los Angeles, California-based home builder said it lost $30.7 million in the quarter ending May 31. KB Homes posted a loss of $83.6 million in the same quarter of 2009. Nationally, home sales crashed in late May, dropping by 33% as the attractive $8,000 first time homebuyer tax credit expired at the end of April.

Shares of Lennar Corporation (LEN) ended the week at up $14.68 while shares of KB Homes (KBH) finished down at $11.12.

BP's Relief Well Doesn't Stop Stock Loss

British Petroleum announced that a relief well should be completed by mid-August. The hope is that the new well will relieve pressure from the gushing Deepwater Horizon site and allow the oil company to permanently cap it. Meanwhile, oil continues to wash ashore on the Gulf Coast. Officials in Florida have closed several beaches as pools of thick crude oil welled up near the Mississippi state line. Oil has also reached past the barrier island and entered the Mississippi Sound. Shares of the international oil giant continued to plummet following an announcement that the continuing cost of the leak has, thus far, exceed $2.3 billion.

Meanwhile, on the southern edge of the Carribean Sea, Venezuelan Oil Minister Rafael Ramirez announced on Wednesday that his government would seize eleven oil rigs belonging to Oklahoma-based Helmerich & Payne Corporation (H&P). H&P has had drilling operations in Venezuela and the Orinoco basin for more than 50 years. Drilling on the eleven rigs was halted over a year ago due to ongoing disputes over back payments owed by Venezuela's state-owned oil company, Venezuelan Petroleum (PDVSA). H&P claims VDSPA owes them approximately $43 million for past services. When they refused to pay, H&P halted drilling. This is not the first time Venezuela has seized an oil company's assets. In 2007, PDVSA seized a major stake in projects and assets owned by Exxon-Mobil, Conoco-Philips and Chevron.

British Petroleum, PLC (BP) ended the week down at $27.02; Helmerich & Payne, Inc. (HP) ended the week up at $39.07.

RIM's Profits and Stocks Have Different Motions

Research In Motion, LTD (RIM), makers of the iconic BlackBerry smartphone, announced a jump in corporate profits on Friday only to see shares of its stock drop by 5% in early morning trading. Investors reacted negatively to the Waterloo, Ontario, Canada based RIM's first-quarter financial reports that showed sales and shipments of phones below many analysts' projections. While sales of the BlackBerry remain strong, an increase in competition (from Apple with its newest model of the iPhone and from Google's much heralded Android device) has resulted in a slow-down in the number of phones sold by RIM. Not to be left behind, RIM plans to unveil several new devices over the remaining quarters of its fiscal year.

While stock prices trended down, profits at the technology company are on the rise. RIM reported that it sold more than 11 million BlackBerrys and added almost 5 million new customers in the first quarter of this year. First-quarter profits increased to $769 million from $643 million or $0.36 a share, during the same quarter of 2009.

Research in Motion, LTD (RIMM) ended the week down at $52.23.

The Dow started the week at 10,451 and ended at 10,144. The S&P 500 started the week at 1,118 and ended at 1,077. The NASDAQ started the week at 2,310 and finished at 2,223.

Treasury Yields Drop on Sluggish Economy

Treasury prices rose, sending yields down on Friday as news spread that the U.S. economy grew at a sluggish pace during the first quarter of 2010. The report was a restatement of estimates that showed the economy expanding to a larger degree than its actual rate. The report also indicated that the economy will continue its slow climb during the current quarter.

Yields on the 2-year Treasury note fell as low as 0.63%, approaching an all time low of 0.60% set in 2008. In addition, the 10-year note hit its lowest mark since 2009. Yields and prices move in opposite directions. Bonds become more attractive when investors become uneasy about the direction of the stock markets. Investors flocked to bonds when news broke earlier in the week about declining home sales and continued uncertainty over European debt obligations. The Federal Reserve indicated that it too sees continuing risk in the economy by electing to keep interest rates at their current low levels near zero. Finally, a report issued by the U.S. Department of Commerce said that gross domestic product rose at an anemic 2.7%, lower even than the 3.0% officials had estimated. Many do not expect to see increased trading pending the outcome of the G-20 meeting in Toronto, Canada next week.

The 10-year Treasury note yield began at 3.22% and ended at 3.11%. The 30-year Treasury note yield began at 4.14% and finished at 4.07%.

Mortgage Rates Hit Record Low, Shake-Up at Freddie Mac

Freddie Mac reported a drop in mortgage rates this week. The 30-year fixed-rate mortgage (FRM) averaged 4.69% with an average 0.7 point for the week ending June 24, 2010, down from last week when it averaged 4.75%. Last year at this time, the 30-year FRM averaged 5.42%.

The 15-year FRM this week averaged 4.13% with an average 0.6 point, down from last week when it averaged 4.20%. A year ago at this time, the 15-year FRM averaged 4.87%.

"Mortgage rates for all but traditional 1-year ARMs hit all-time record lows this week in our survey while activity in the housing market slowed in May following the expiration of the homebuyer tax credit," said Frank Nothaft, Freddie Mac vice president and chief economist. "Both new and existing home sales showed unexpected declines in May. Existing sales fell 2.2%, compared to the market consensus forecast of a 6.0% gain, based on figures published by the National Association of Realtors. Sales of new homes fell 32.7% to an annualized rate of 300,000 units, which was the largest monthly drop and slowest pace since records began in 1963, according to the Census Bureau."

In other news, Freddie Mac fired its vice president of operations and technology, Michael Perlman on Monday. The mortgage lender did not provide any explanation in its regulatory filing on Friday and indicated that it would not do so in the future. Freddie Mac has seen significant troubles since nearly collapsing amid the weight of worthless mortgage-back securities. The corporation was created by Congress in 1970 and re-taken by the government in September of 2008.

The money market fund finished this week at 0.80%. The 1-year CD finished at 1.10%.

Stocks - Pier 1 Imports Posts a Profit
Bonds - Treasury Yields Drop on Jobless Claims
Interest Rates - Little Change in Mortgage Rates

Stocks - Dell in Settlement Talks with SEC
Bonds - Treasuries Rise on U.S. Retail Sales Data
Interest Rates - Mortgage Rates Remain Low

Stocks - Ford Sales Up; Mercury to be Phased-Out
Bonds - Treasuries Rally on Hungarian Economic Problems
Interest Rates - Mortgage Rates Low on Market Instability

Stocks - British Petroleum's Costs to Cap Oil Leak Top $900 Million
Bonds - Treasuries Advance on Continued Fears
Interest Rates - Mortgage Rates at Yearly Lows

Stocks - Dell Falls on Weaker than Expected Profits
Bonds - Treasuries Rise and Fall on European Economic Woes
Interest Rates - Mortgage Rates Fall Again