For Immediate Release
Chicago, IL – December 17, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Fannie Mae (FNM), Freddie Mac (FRE), LSI Industries (LYTS), Black & Decker (BDK) and Stanley Works (SWK).
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Here are highlights from Wednesday’s Analyst Blog:
No Change at the Fed
The quantitative easing program — buying up the Fannie Mae (FNM) and Freddie Mac (FRE) mortgage-backed securities and debt — is now about 85% complete, and it does not sound like they are planning on extending it. Recently the pace has been about $17 billion a week, and if they were to finish the program at the end of March as they indicate, that means that on average they would be spending about $12 billion a week.
The Fed buying has probably lowered mortgage rates by about 0.50% from where rates would otherwise be (based on historical spreads of mortgage rates over the 10-year T-note). How much of a hit the housing market will take if mortgages were to rise by that amount after they finish up is still and open question.
They kept the key phrase of “exceptionally low levels of the federal funds rate for an extended period.” They did, however, drop the language of using a wide range of tools. In other words, they are not going to try to pull another rabbit out of their hat to try to increase liquidity further in the face of the zero boundary on the fed funds rate. The Fed thinks we have successfully escaped from the liquidity trap.
Housing Starts, Building Permits Rebound
The increase in New Home sales last month makes the rise in housing starts and building permits much less of a long-term problem than it would have been if new home sales had stayed depressed. Thus we are free to focus on the more positive aspect of the rebound in building permits and housing starts.
These are not insignificant. Traditionally, Residential Investment is the part of the economy that leads coming out of recessions. New housing starts and building permits rising are a direct indication of Residential Investment going up. Residential Investment was actually a slight positive to GDP growth in the third quarter after having been a major drag on the economy for over three years. The November numbers in starts and building permits indicate that it will be additive to growth in the fourth quarter as well.
Also, a rise in housing starts and building permits means jobs for construction workers, and for those firms like LSI Industries (LYTS) which make the lighting fixtures that go into the new homes. It is also a positive for the soon-to-be-merged Black & Decker (BDK) and Stanley Works (SWK), since those construction workers will presumably need new tools to work with. All three of those firms hold the coveted Zacks #1 Rank. Housing, and housing starts, have been at the heart of the recession, and this report indicates that it will at least participate in the recovery.
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