The market seems to have decided that the ‘Fiscal Cliff’ was a done deal, notwithstanding the continued bickering from both sides. The collective wisdom of the market appears to view the statements from both sides as nothing more than tactical maneuvering for a better deal for their side.
I don’t think investors are misjudging the ground realities, but we will find out in the next few days. While ‘Cliff’ optimism will likely add some more to the holiday spirit in the market today, we also have a not-so-bad Housing Starts report and a couple of positive earnings releases that should add to market momentum.
The November Housing Starts data came in modestly weaker than expected at 861K relative to expectations of 865K and October’s 888K level (revised down from the originally reported 895K level). The decline from October’s level was primarily due to the effects of Sandy. Starts were down in two of the four regions in November, with the West dropping 19.2% and the Northeast declining by 5.2%, with the Midwest and the South showing gains of 3.3% and 2.9%, respectively.
Single-family construction dropped 4.1% during the month, while multi-family starts dropped 1%. Offsetting the Starts weakness was the strength on the Permits front, which came in better than expected at 899K vs. expectations of 875K and the prior month’s 866K level. The Permits strength is particularly significant as it indicates future momentum on the home construction front.
We still have a few more weeks to go before the fourth quarter reporting season ramps up. But Oracle’s (ORCL - Free Report) better-than-expected quarterly report after the close on Tuesday gave us a solid start to the earnings season. Strength on the software side and margin gains helped Oracle make up for continued weakness on the hardware side of the business. The company’s guidance for the coming quarter appears in-line with current consensus expectations.
Among results this morning, we got a solid earnings beat and positive guidance from General Mills (GIS - Free Report) , while FedEx (FDX - Free Report) results are good enough when adjusted for the effects of Hurricane Sandy.