Market Rallies On Upbeat Home Sales Figures

Warming news of upbeat home sales figures as well as big earnings reports were able to lift the market from its three day major downturn.  The Dow Jones Industrial Average jumped 1.78% to a close of 8,078.36 just as the Nasdaq and S&P 500 rose 1.46% and 1.58% respectively to levels of 1,516.30 and 838.51.  With all the good news on the street crude oil responded with a boost of $0.17 to a close of $40.95. Gold also jumped $8.50 to $901.  The National Association of Realtors released surprising news that the seasonally adjusted index of pending sales for pre-owned homes rose 6.3% percent in the month of December.

Merck Co. Inc. (MRK) reported diluted earnings per share of $0.78, beating analysts estimates of $0.74 earnings per share.  This was compared to $0.75 earnings per share a year ago due to a $4.85 billion charge for a settlement.  Merck noted lower fourth quarter costs for general materials and production as well as citing the fact that restructuring was down over $50 million from 2007.  The company said it took a $62 million charge in the fourth quarter for future legal defense costs related to Vioxx, which Merck pulled from the market in September 2004 because the then-blockbuster arthritis pill doubled risk of heart attacks and strokes.  Merck expects to lay off about 5,300 more workers under a new restructuring plan announced in October.

Homebuilder D.R. Horton (DHI) reported diluted earnings per share of -$0.20, beating analysts estimates of a loss of -$0.56 earnings per share.  This was less than last years loss of -$0.41.  The 47% percent decline in Horton’s home building revenue to $900.3 million reflects the ongoing difficulties of an operating environment in which a glut of supply and tight lending standards should result in further reductions in home prices.  The company ended the quarter with over $1.9 billion in cash reflecting the company’s aggressive pricing strategy and overall focus on cash.

Posting a fourth quarter loss, PNC Financial Services Group Inc. (PNC) reported diluted earnings per share of -$0.77 compared to $0.52 earnings per share a year before.  PNC attributed its loss to its December 31 acquisition of National City Corporation. PNC still believes that National City will provide them with a unique opportunity to grow as a franchise as well as doubling their assets and customers.  They also announced that they would be eliminating 5,800 positions by 2011 which will be around 10 percent of their workforce.

United Parcel Service Inc. (UPS) reported fourth quarter earnings of $0.25 a share compared to a loss of -$2.52 in the fourth quarter of 2007.  UPS has consolidated operating districts, and reducing overall air segments as well as eliminating some of its package handling operations.  They also have included a $575 million non cash impairment charge related to their Freight business unit facing a challenging partial truckload environment.

Thanks for catching up with us today, please join us again tomorrow.

Disclosure: The mutual fund the author manages is long PNC.

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