Is Weather the Only Explation? - Ahead of Wall Street
February 19 2014 - 9:46AM
Zacks
Wednesday, February 19,
2014
Soft home construction and a tame wholesale inflation reading
provide the backdrop for today’s stock market action. Also on tap
for release later this afternoon is minutes of the last Fed meeting
when they announced sticking to their Taper plans. The minutes
aren’t expected to spring any surprises through it will be
interesting to see the discussion within the FOMC of recent soft
economic data.
This morning’s soft January Housing Starts and Permits reconfirmed
the trend that we have been seeing repeatedly in recent days and
comes a day after the unusually big pullback in the homebuilder
sentiment index. Weather is getting all the blame, prompting
investors to overlook the recent weakness and look for improvement
as the economy’s deep freeze thaws with the arrival of Spring.
Since February has seen no improvement on the weather front, we
will need to wait at least through April (for March data) to start
seeing some light. As such, investors have given up on GDP growth
in the first quarter, with the economy’s growth momentum expected
to resume in the second of the year.
The weather explanation makes sense, though the regional breakdown
of today’s Housing Starts, particularly in the Northeast, don’t
sync-in with that explanation. We saw a somewhat similar disconnect
at play in last week’s negative revision to December and November
Retail Sales numbers that appear to show less consumer spending
momentum in Q4 than earlier believed. Only time will tell what
really is going on in the economy, though stock market investors
don’t appear overly skeptical of the weather explanation at this
stage.
In corporate news, Signet Jewelers (SIG) is
acquiring fellow jewelry retailer Zale Jewelers
(ZLC). In deals like these, we typically see the acquirer’s stock
come under pressure while the target company’s stock goes up for
obvious reasons. But investors appear to be appreciative of the
deal, with SIG is expected to open higher. We saw something at work
in Tuesday’s big pharma sector deal when Dublin-based
Actavis (ACT) acquired Forest
Labs (FRX).
Sheraz Mian
Director of Research
ACTAVIS PLC (ACT): Free Stock Analysis Report
FOREST LABS A (FRX): Free Stock Analysis Report
SIGNET JEWELERS (SIG): Free Stock Analysis Report
ZALE CORP NEW (ZLC): Free Stock Analysis Report
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