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Earnings & Economic Data Deluge

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As investors welcome mostly positive Q3 earnings results so far early on in the new reporting season, we also get new information on the housing market this morning, from a couple different sources: Housing Starts/Building Permits and new Mortgage Applications. All these figures reflect some strain within the all-important residential real estate sector.

Starting with Housing Starts, we saw September results fall 50 basis points lower than expected to -5.3%, or a tally of 1.201 million seasonally adjusted annualized units. This is lower by approximately 7000 from the consensus estimate. Revisions to the month of August were also lower, from 1.28 million originally reported to 1.268 million this morning — or down to +7.1% from the initial 9.2%.

Building Permits were down slightly in September from August’s 1.25 million to 1.241 million. Looking at both this number, which are a forward indicator toward future Starts, and the actual Starts from last month, we may assume there are some negative affects from hurricane season, particularly Hurricane Florence on the Carolina coast. These month-over-month drops, if explained solely by the storms, are more than enough for us to continue out longer-term narrative of an overall strong housing market.

However, Mortgage Applications dropped again last week, this time by 7.1%. Banks have been seeing weakness in new mortgage loans (despite strong Q3 earnings results thus far from most of the big Wall Street banks) of late, and every step down the ladder further exacerbates this. With interest rates at the Fed continuing to rise gradually, we are seeing costs for new mortgages rising, now to an average of 5.1%, another 50 basis points higher than the previous read. This is the highest we’ve seen mortgage rates since February of 2011.

Speaking of interest rates, minutes from the last Federal Open Market Committee meeting, where participants agreed to raise interest rates another 25 basis points to a range of 2.00-2.25% last month, will be released at 2pm ET today. Analysts will be parsing language used in the report to determine future interest rate moves by the Fed, although it’s already baked in the cake — mostly — that December will bring yet another quarter-point hike.

Switching to earnings, United Continental (UAL - Free Report)  missed estimates on the bottom line while beating slightly on the top: $3.06 per share versus $3.09 expected (and $3.23 per share in the year-ago quarter) was offset by an even $11.0 billion in sales for the quarter topping the $10.9 billion estimated and the $9.88 billion the airline major brought in for Q3 2017. Yet upward guidance has prodded the stock forward, up 5.5% in today’s pre-market. For more on UAL’s earnings, click here.

Abbott Labs (ABT - Free Report)  posted a slight beat on both top and bottom lines in its Q3 earnings report this morning, with 75 cents per share a penny above expectations, with a slight beat on revenues to $7.66 billion in the quarter, and well above last year’s Q3 top line of $6.83 billion. But with markets trading mixed in today’s early session, we see Abbott shares down slightly following the report. The company’s stock is still up about 24% year to date. For more on ABT’s earnings, click here.

And, lest we think we’ve already heard from all the big banks this earnings season, U.S. Bancorp (USB - Free Report)  comes out with its own positive earnings and revenue surprises ahead of the opening bell today. Earnings per share of $1.06 topped expectations by 2 cents, while revenues brought $5.7 billion in the quarter, ahead of the $5.6 billion in the Zacks consensus. Shares are trading even ahead of the bell. For more USB’s earnings, click here.




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