Filed under: Economic data, Housing, Federal Reserve, Recession

Mortgage applications decreased last week, as an increase borrowing costs discouraged both buy and mortgage refinancing activity, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association’s composite index of applications declined 14.2% on a seasonally-adjusted basis to 637.6 from last week’s 734.4.

The Refinance Index decreased 20.2% to 2,286.3 from 2,866.0 the previous week and the seasonally adjusted Purchase Index decreased 6.4% to 357.3 from 381.6 one week earlier.

Rates rise

Meanwhile, the average rate for a 30-year fixed loan rose to 6.04% from 5.74% the prior week. The average rate for a 15-year fixed mortgage increased to 5.60% from 5.27%.

Also, the share of applications that involved a refinance declined to 49.2% from 53.5%.

Created in 1990, the Mortgage Bankers Association’s loan survey covers about half of all U.S. retail residential mortgage originations.

Economic Analysis: Mortgage rates remain stubbornly high. The average rate rose about 25 basis points in the past week; this is a regression the U.S. Federal Reserve will have to watch closely, as it is weighing on mortgage applications. The Fed has cut benchmark, short-term interest rates by 300 basis points since September 2007, but mortgage rates have not fallen — they’re essentially flat, on a year-over-year basis. That’s a tell-tale sign that banks remain concerned about their portfolios and about sluggish housing market conditions. For the housing sector to regain its sea legs — and to help increase U.S. commercial activity — mortgage rates must move toward the lower-end of their 10-year range.

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Last year, the Mars Reconnaissance Orbiter captured high-resolution images of the Red Planet which showed many mesas, valleys, and rock debris which appeared to be (geologically speaking) recent formations. A team of scientists from Brown University examined the photographs and found evidence that the terrain was carved by large glaciers much more recently than they thought possible. Climate activity on Mars was thought to have quieted over 3 billion years ago, but these glaciers would have been around within the last 10-100 million years. “The finding could have implications for the life-on-Mars argument by strengthening the case for liquid water. Ice can melt two ways: by temperature or by pressure. As currently understood, the Martian climate is dominated by sublimation, the process by which solid substances are transformed directly to vapor. But ice packs can exert such strong pressure at the base to produce liquid water, which makes the thickness of past glaciers on its surface so intriguing.”

Read more of this story at Slashdot.

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eldavojohn writes “A recent meeting held by the Finnish Meteorological Institute has resulted in plans to build an electric solar sail that will circle the Earth, gaining speed to test its acceleration. The purpose? ‘A flight out of the solar system to measure the gas, dust, plasma and magnetic field in the undisturbed interstellar space would perhaps be the “flagship” thing to do,’ stated Pekka Janhunen, a researcher developing the sail at the FMI. The details and papers of this project (over two years in the making) are also available. I certainly hope it will show more success than the launch of the similar U.S.-Russian venture and its subsequent complete failure.”

Read more of this story at Slashdot.

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jbrodkin brings us a story about the development of the personal network supporting CERN’s Massive Hadron Collider, which will start smashing particles into one another later this year. We’ve discussed some of the impressive abilities of this network in the past. “Data will be gathered from the European Organization for Nuclear Research (CERN), which hosts the collider in France and Switzerland, and distributed to thousands of scientists throughout the world. One writer described the grid as a ‘parallel World wide web.’ Ruth Pordes, executive director of the Open Science Grid, which oversees the U.S. infrastructure for the LHC network, describes it as an ‘evolution of the World wide web.’ New fiber-optic cables with special protocols will be used to move data from CERN to 11 Tier-1 sites around the globe, which in turn use standard World wide web technologies to transfer the data to more than 150 Tier-2 centers. Worldwide, the LHC computing grid will be comprised of about 20,000 servers, primarily running the Linux operating system. Scientists at Tier-2 sites can access these servers remotely when running complex experiments based on LHC data, Pordes says. If scientists need a million CPU hours to run an experiment overnight, the distributed nature of the grid allows them to access that computing power from any part of the worldwide network”

Read more of this story at Slashdot.

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Filed under: International markets, Products and services, Consumer experience, Middle East, Economic data, Commodities, Oil, Federal Reserve

Oil prices have dropped slightly today following the weekly inventory report from the U.S. Department of Energy. Typically, the weekly inventory reports are able to move prices one way or the other, but this week we got blended signals, and consequently, prices haven’t reacted too much in either direction.

Following the current surge in oil prices, traders were looking for some concrete data to justify more price moves, but they were given a larger than expected decline in gasoline inventories, but higher than anticipated oil inventory numbers .

Analysts were anticipating to see gasoline inventories drop by 2.1 million barrels, but the actual decline was 3.2 million barrels. Not good news for drivers that are already feeling the pain of record high gasoline prices. On the oil side, analysts had been looking to see inventories rise by 1.1 million barrels, and the actual increase was over twice that amount, at 2.4 million barrels.

So, blended messages, and nothing to really cause prices to move too much. Oil was trading down 7 cents following the news. With the recent craze that has been taking place in the oil market, today’s report could at least create a slow pull back in oil prices, but don’t anticipate any earth shaking moves to the downside.

But what is really on everyone mind are gasoline prices. With the summer driving months rapidly approaching, everyone is holding their breath in hopes that the national average isn’t $4.00 a gallon this summer. For some areas of the country, however, $4.00 gasoline is already a reality, and there’s no telling just how high says like California will see prices head before it is all said and done.

Current gas prices have already started to impact consumer demand. According to a recent report, gasoline demand is up 0.9% from the same time last year, an increase that’s lower than what we are used to seeing this time of year.

So we might see prices begin to ease a bit over the next week, but long term I still think that prices are going to remain at, or even higher than current levels. The U.S. dollar has yet to rebound, and more interest rate cuts are on the horizon. The perfect recipe for high oil prices.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the internet investment advisory service Investor’s Observer.

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Filed under: Bad news, Products and services, Consumer experience, Politics

Most Americans don’t want to be poisoned by medications or components used to make medications which come from overseas. Imports from China come to mind.

Over the last month, the government has disclosed that over 80 people in the US have died from tainted Heparin, a blood thinner. So far, the most likely cause is problems with a basic ingredient for the drug which is made in China.

Now word comes that for just $70 million, inspections could be much superior and more widespread. That’s $70 million dollars which could save lives and protect consumers from bad drugs. Only $70 million.

According to The Wall Street Journal the FDA “would need about $15 million to inspect about 700 facilities in China alone.” That seems like a very modest investment.

Underfunding an agency like the FDA is a very bad idea. Its capability to inspect drug facilities seem to be essential to the health and well-being of taxpayers, and the two alternatives are much less desirable.

The first is to do very few inspections and let drugs with problems come into the US. That way the government can find out if the ingredients aren’t OK when people start to die. The other option is to have the companies who make the drugs handle the inspections. How many firms want to take on those costs? How many can afford it?

Congress needs to give the FDA a few more bucks.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Earnings reports, Products and services, Delta Air Lines (DAL)

Just when you think that the airlines have run out of ways to bleed red ink, along comes Delta Airlines Inc. (NYSE: DAL) and Northwest Airlines Corp. (NYSE: NWA).

The Atlanta-based carrier reporting a staggering loss of $6.14 billion, or $16.15 per share. Excluding a bankruptcy-related charge, Delta would have earned $274 million, or 69 cents per share, as fuel costs soared by $585 million compared with a year earlier. Revenue rose to $4.77 billion. Analysts had expected a loss of 51 cents on revenue of $4.6 billion, according to Thomson Financial.

“Our need to respond to the pressures of dramatically rising fuel costs and a softening U.S. economy drove us to take a closer look at all options to protect Delta’s future,” said Chief Executive Officer Richard Anderson in the earnings release. “The merger with Northwest will create an airline with the size, scale and global presence to weather economic downturns and compete long-term in the global marketplace.”

It was more of the same for Northwest, which is based in Eagen, Minnesota The carrier reported a first quarter loss of 4.14 billion, or $15.78 per share, on sales of $3.13 billion. Analysts had expected a loss of 30 cents on revenue of $3.13, according to Thomson Financial.

Not surprisingly, Northwest President Doug Steenland said much of the same thing in his company’s earnings release, adding that the combined company will “better able to match the right planes with the right routes, making transportation more efficient across our entire network.”

Investors aren’t buying the companies’ line, sending shares of both companies down in early trading. Delta’s stock has dropped more than 54% year-to-date. Northwest’s are down more than 48%.

The question remains whether combining the two carriers will create a stronger airline or a larger, weaker one.

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Filed under: Earnings reports, Products and services, Boeing Co (BA)

Boeing Co. (NYSE: BA), whose shares have been battered by concerns about delays in the 787 Dreamliner, today reported better-than-expected earnings.

Profit rose to $1.21 billion, or $1.61 a share, from $873 million, or $1.12, a year earlier, the company said in its earnings release (pdf). Sales gained 4.1% to $16 billion. Analysts had expected earnings of $1.35 on revenue of $16.52 billion, according to Thomson Financial.

“We’re off to a good start in what we anticipate to be another strong year of financial performance for Boeing,” said Chairman, President and Chief Executive Officer Jim McNerney in the release. “We are methodically working through our challenges, including the start-up of the 787, and our people remain focused on satisfying our customers and leveraging growth and productivity into better bottom-line and top-line performance for our
company.”

Backlog at the quarter was $346 billion, up 32% year-over-year, driven by orders for commercial airplanes at the V-22. Investors responded positively to the news, sending the shares up in premarket trading. The company also reaffirmed its guidance of $5.70 to $5.85 this year and gave guidance of $6.80 to $7 per share for 2009. Analysts expected profit of $5.93 this year and $6.87 for next year.

This goes to show you that yesterday’s dogs become today’s heroes on Wall Street. Anything remains possible in today’s market where conventional wisdom regularly is proven wrong.

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Filed under: Products and services, Crocs Inc (CROX)

Yesterday, I wrote about Crocs Inc. (NASDAQ: CROX) and the problems the company is having in Japan. The government there has asked the company to consider changing the design of its footwear after reports that kids were getting hurt wearing its rubber sandals on escalators.

What’s interesting is that the reports about Crocs’ safety issues have all come from the media, not the company’s SEC filings. Back in 2006, ABC reported that Crocs can pose a danger on escalators. Some hospitals have even banned the shoes citing safety concerns.

But Crocs’ latest 10-K is devoid of any references to the concerns about the safety of the shoes.

A similarly struggling fad shoe company, Heelys (NASDAQ: HLYS), has also dealt with issues surrounding the safety of its footwear. From the risk factors section of the company’s latest 10-K:

Negative publicity relating to our products could cause our HEELYS brand to suffer and adversely affect our net sales and results of operations.

Various media outlets have reported on injuries suffered by users of our products and have quoted from or referred to medical studies and U.S. Consumer Product Safety Commission data relating to injury rates of users of wheeled footwear. This negative publicity and any future negative publicity relating to the safety of our products or products similar to ours could cause our HEELYS brand image to suffer and adversely affect our net sales and operating performance.

There’s more:

Additional bans on the use of our HEELYS-wheeled footwear due to public safety and liability concerns could adversely affect our net sales and results of operations.

Various places of business and other institutions, such as shopping malls and schools, have imposed bans on the use of our HEELYS-wheeled footwear due to public safety and liability concerns. If the number of businesses and other institutions instituting such bans increases in the future, consumers could find our HEELYS-wheeled footwear less appealing, which could adversely affect our net sales and result of operations.

By not disclosing safety concerns as a risk factor, Crocs appears to be sending investors the message that the safety concerns aren’t material. Whether reality will agree with that assessment remains to be seen.

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Filed under: Earnings reports, Forecasts, Products and services, Apple Inc (AAPL), iPhone

Tech superstar Apple Inc. (NASDAQ: AAPL) is going to be joining the earnings parade tomorrow afternoon when it reports is fiscal second quarter numbers following the market close.

The last time Apple reported earnings was back on January 22, when it reported its fiscal first quarter numbers. The company blew away analyst estimates by posting earnings of $1.76 a share, well above the $1.62 that Wall Street had been expecting to see. This led to a large jump in Apple stock, right? Wrong. Instead, the company’s stock went into a tail spin, falling over 40 points, and erasing around $36.5 billion from the company’s market cap.

After the collapse, the stock did rebound nicely, and is once again trading above the $160 mark, so it will be interesting to see just how the market reacts to the company’s numbers this time around.

What really spooked investors following its last earnings report was the guidance that it issued for its second quarter. The company said that it expected to see 94 cents a share for the second quarter. This was well below the $1.09 that Wall Street was looking for, and hence the steep sell off of the stock.

Historically, Apple has been pretty conservative in its estimates, so it wouldn’t surprise me at all to see the company come in higher than the 94 cents it has forecast. Will it match the $1.07 that Wall Street is now predicting? That remains to be seen. And even if it does, what will it predict for its third quarter? Your guess is as good as anyone else’s on that topic, and as we noted above, what the company expects for its third quarter will probably be the driving force behind which way the stock moves come Thursday morning.

By all accounts, the company’s MacBooks had a great quarter. While the overall computer sales slowed to around 3% growth in the quarter, analysts have reported that the MacBook saw an increase of anywhere between 25.1% and 32.5%. Not too shabby.

The iPod could disappoint. The iPod was one of the driving forces that revitalized the company over the past few years, but the once explosive growth in iPod sales has faltered as of late, and this year analysts are predicting that iPod sales will increase by “only 10%.”

The final product that traders will be looking to hear more about is the new iPhone. The iPhone was launched to much fanfare, and the company has predicted that it will sell 10 million phones in 2008. That’s a pretty hefty number, and would require 2.5 million units sold each quarter, on average. The numbers should be helped in the latter part of the year after the company releases a new three gig 3G iPhone, and if the numbers in the second quarter are too far below 2.5 million units sold, it could mean that the new iPhone will be rolling out much sooner than anyone expects. Currently investors expect the new model to be out sometime in June. If we see weak sales in Q2, they’re anticipating that the new iPhone will be coming sooner than that.

So, all in all, there are a lot of factors that’ll determine how investors react to this week’s earnings release. Will see another sharp sell off, or can we expect to see the stock march towards the $200 mark? I wish I knew the answer to that one, but unfortunately we’ll just have to wait and see what the company has in store for us tomorrow afternoon. Should be an interesting ride!

For a better idea of just how crazy the past three months have been since its last earnings report, let’s close by looking at a three month chart for the stock:

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer.

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