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Stock Market Today: Housing Data Makes KB Home (NYSE: KBH), Homebuilder
Stocks a "Hold"
This week's housing market data ended with lower new home sales than expected, triggering a slip for KB Home (NYSE: KBH) and other homebuilder stocks in the stock market today (Friday).
Shares of builder KB Home tumbled more than 13% in early morning trading. Also pushing investors away from the stock was the company earnings report that missed analyst expectations.
For the quarter ended Feb. 29, KB Home's net loss was $45.8 million, or 59 cents a share, down from a $114.5 million loss, or $1.49 a share, a year earlier. Analysts expected a loss of 23 cents a share, according to Bloomberg News.
Signs of a housing market bottom have helped push KBH up 67% this year. As of Thursday's close it was one of the top performers in the S&P 500 Index year-to-date.
But new home orders slipped last quarter – and the company is saddled with debt. Net orders declined 8.1% to 1,197 homes. The cancellation rate rose to 36% from 29% a year earlier.
Its high debt level has prevented KBH from regaining profitability.
How to Profit on the Natural Gas Surplus
The recent mild winter and the unparalleled potential in new shale gas production have combined to result in a depressed pricing market for natural gas.
The rise in demand for everything from electricity to petrochemical feeder stock, liquefied natural gas (LNG) exports, and even usage in vehicle fuels, will start driving that price up over the next two years.
You already know that, of course.
We've talked about it many times before.
But now there's something else on the horizon that is likely to provide a boost to investor prospects even sooner.
Utilities, one of the main beneficiaries of the gas boom, are moving to capitalize on the accelerating transition in power generation.
And in the process, two important trends are emerging that will be of interest to retail investors.
First, the low current prices and the prospect of rapid increases in extraction rates, if the market warrants, are allowing electricity managers the opportunity to plan for multi-year cost projections.
That, in turn, is propelling the intensified replacement of aging capacity with new gas-fueled plants.
As Pacific Gas & Electric Co. (NYSE: PCG) CEO Tony Earley noted this week, infrastructure investment becomes a priority when projected fuel prices are low. The system has to be upgraded and replaced in any event, as large segments of it reach the point of "retirement."
Earley also has advanced the idea that the power industry needs to speak with one voice in its dealings with regulators and policy makers.
This need for solidarity has been reflected in comments from other leaders in the power industry as well.
As policymakers increase capital expenditure spending in infrastructure replacement and expansion, we are also likely to see a renewed interest in developing a consensus on where the next "generation of generators" is going to be moving.
And one of the drivers coming onto the scene moves right into familiar – and profitable -territory, at least for us.
The Irony of China's Search for Energy
Kent was in Huntington Beach, Calif., earlier this week to present the keynote address on "The Future of U.S. Energy Policy" at the CoBank Annual Meetings.
I hope he didn't have to rent a car. If so, he's probably still suffering from sticker shock.
The average price of regular gasoline in the Golden State is around $4.32 – a record high for this time of year.
He probably would have been better off cruising down to Mexico to refill his tank instead.
Thanks to government regulations to artificially suppress the price, American drivers can find gasoline in Mexico for up to $1.50 a gallon cheaper than in the U.S.
But drivers also have to ignore U.S. State Department travel warnings. A willingness to cross the border anyway shows just how important inexpensive fuel is to drivers living on a budget.
It all comes back to the subject that Kent and I have written on with a lot of passion in the last few months.
The U.S. has lacked a cohesive energy policy for the last four decades, with every President since Nixon ignoring his own calls for energy independence and an effective strategy moving forward.
And as the global economy becomes more competitive, access to less expensive sources of oil wanes, and political tensions drive greater uncertainty, there's new irony to our lack of a real energy policy.
And it's leading to new competition for fuels in our own back yard.
Monday's Stock Market News: UPS Inc. (NYSE: UPS), US Steel Corp (NYSE: X), Glencore
Monday's stock market news from United Parcel Service Inc. (NYSE: UPS), U.S. Steel Corp. (NYSE: X), and Glencore International Plchelped drive gains in U.S. markets. The Dow moved up a slim 0.05% to close at 13,239.13; the S&P 500 climbed 0.4% to close at 1,409.75; and the Nasdaq rose 0.75% to 3,078.32.
United Parcel Service Inc. (NYSE: UPS) biggest deal in company history: UPS announced Monday a $6.77 billion deal to buy Netherlands-based delivery service TNT Express NV to bolster global sales growth.
TNT is Europe's second-biggest express mail company. Its acquisition will double the UPS presence in Europe and give it about the same market share as the region's industry leader DHL. The deal also will boost UPS's international sales to 36% of its total from 26% currently – a significant leap towards the company's goal of 50%.
It is Deja Vu All Over Again in the Energy Markets
There's been quite a bit of news on whether the government will tap the Strategic Petroleum Reserve (SPR) to combat rising gasoline prices.
I get the feeling I've been here before.
In fact, I wrote about this very topic just three weeks ago. And sure enough, we had conflicting reports on the subject yesterday.
But despite what my wife Marina may think, I don't cause events in the oil markets merely by writing or talking about them.
She remains convinced that when I go on television and discuss higher oil and gas prices, my words provide energy firms the green light to raise them.
The reality is that I just know how politicians think (and panic) when it comes to the energy markets. So please, refrain from shooting the messenger.
Yesterday we also witnessed mixed messages from both politicians and the market.
Crude oil prices initially dove more than $3 per barrel in both London and New York when the story broke that there was a joint U.S.-U.K. agreement to release volume from each country's strategic reserves.
Later in the afternoon, prices shot back up quickly in New York (by that time the market had closed in London) following a White House denial that any such deal was in the works.
Still nobody inside the Beltway is claiming the idea is now off the table.
Was yesterday a trial balloon? Some junior staff member with an itchy dialing finger?
A hasty press release?
All are certainly possibilities.
But the confusion created in the aftermath of the "leak" hides one very simple, inconvenient truth.
There are few, if any, genuine options to offset rising gasoline prices.
Everything we need to do will take a few years to work out.
And it should. But you and I need to continue this conversation.
Bank Stress Tests and the All-Clear-to-Rally Signal
Earlier this week I repeated that I've been cautiously bullish (too cautious, I also said) since October.
I also told you I was optimistic that all the major indexes would break through the important psychological, headline, and large-round-number resistance levels they started flirting with two weeks ago.
Boy, was that an understatement.
On Tuesday, markets blew the lid off of any impediments in their way.
In fact, the price action was so fast and furious you'd have thought the Federal Reserve said something about keeping interest rates low, or maybe that some good news about bank stress tests had leaked out.
And to think, only one week earlier, markets had a steep fall from grace on account of Fed Chairman Ben Bernanke not saying anything about another round of quantitative easing.
What a difference a week makes.
In case you missed the psychology of the market, it went like this…
What Someone Needs to Ask the Presidential Candidates
Kent is in Europe this week, advising on oil supply concerns in cash-strapped nations.
And it's getting serious over there.
As he noted on Fox Business last week, Greece imports nearly 30% of its oil from Iran, and the country needs fuel in order to keep its economy moving in these uncertain times.
I don't think our leaders or media say this enough, but energy is the catalyst of economic growth and human progression. And a lack of reliable fuel sources will only make this teetering European economy even more susceptible to its ongoing debt woes.
The last 100 years of prosperity in the U.S. was not driven by abstract ideals like the "American spirit."
Cheap, efficient energy sources fueled our growing global economy. They were an underlying driver of a population boom and expansion across the continent. Without them, we wouldn't have our highways, sprawling suburbs, or supporting infrastructure that has made this country so unique.
But the days of cheap oil are fading fast. Production costs are rising as we shift toward unconventional oil fields and tight gas formations for our sources.
So, once again, we're looking to alternative forms of energy.
You Asked, He Answered: Shah Gilani on China, Ben Bernanke, the Fed and Much More…
Tags: Ben Bernanke, China economy, Dow Jones, Federal Reserve, Investing in China, Stock Market, Wall Street
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