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February CPI and housing starts; Fed meeting begins; Hertz announces spin-off

Dean Arrindell
Hot Stock Minute

Consumer prices rose 0.1% in February, in-line with what economists were expecting. The core rate, which strips out the more volatile food and energy sectors, also rose 0.1%. Food prices rose 0.4% in February, its largest increase since September 2011.

Meanwhile, housing starts fell 0.2% in February to 907,000 from an upwardly-revised 909,000 in January. Economists were expecting 910,000 housing starts in February.

Investors are also looking ahead to the Federal Reserve meeting that begins today. Tomorrow, the Fed is expected to announce its latest policy on interest rates and the taper of the monthly bond-buying plan. Fed Chair Janet Yellen will also hold her first news conference since taking over for Ben Bernanke.

Unemployment rates dropped in 43 states in January, while rising in only one state, Iowa, and remaining unchanged in six. Louisiana, Michigan and Tennessee had the biggest drops in January, each falling a half-percent. Rhode Island had the highest unemployment rate at 9.2% and North Dakota had the lowest at 2.6%. Nationally, the unemployment rate dropped 0.1% in January to 6.6%, before ticking back up to 6.7% in February.

New York Attorney General Eric Schneiderman is opening an investigation into high-frequency trading. According to Bloomberg, Schneiderman will look into whether U.S. exchanges, private trading venues, as well as products offered to high frequency traders give those traders an advantage over the public. High-frequency trades can be done in 300-microseconds, faster than trades in the traditional market, allowing about 1000 trades to be executed in the literal blink of an eye. That can lead to big profits, especially on large trades where pennies can make a big difference.

In corporate news, Hertz (HTZ) announced it will spin off its Hertz Equipment Rental business for $2.5 billion. The company said part of the proceeds from the spin-off will be used to fund a $1 billion share repurchase. Hertz also reported earnings before the bell that missed on the top and bottom line due to lower-than-expected pricing and higher expenses related to carrying extra fleet. Earnings per share missed by $0.06 while revenue rose 10%, but missed estimates.

Sources tell Reuters that Microsoft (MSFT) CEO Satya Nadella may unveil an iPad version of Microsoft Office at a speech in San Francisco on March 27th, his first major event since taking over for Steve Ballmer earlier this year. Microsoft reportedly has had versions of Office for the iPad and the iPhone for months, but delayed the release due to internal divisions.

The Wall Street Journal reported Amazon (AMZN) will begin shipping its long-awaited video-streaming device in April through its website as well as retailers like Best Buy (BBY) and Staples (SPLS). Right now, Amazon offers its own streaming-video service, but it's only available on other companies' devices. No word yet on pricing for the Amazon device.

Oracle (ORCL) is scheduled to report quarterly earnings after the close today. Analysts expect a 4% percent increase in revenue and earnings per share to come in a penny below last year. Wall Street will be watching hardware product growth as well as the cloud business.

And we'll be watching General Motors (GM) shares again today after the company announced yesterday another round of recalls due to three different problems. These latest recalls involve about 1.5 million vehicles and are unrelated to the previous recalls that were due to faulty ignition switches. GM CEO Mary Barra last night said this is a turning point in the company's history. Federal authorities are investigating GM's handling of the recalls.

We want to know how you feel about the troubles at GM and the way the company has handled them. Would you still buy a GM vehicle? Cast your vote in our poll and post your comments below as well.

Bob Keiser from S&P Capital IQ spoke with Lauren Lyster about possible reaction to the CPI and housing data released this morning and Janet Yellen’s first Fed meeting as chair.

Keiser said the CPI and inflation data released this morning are in line with the data from the last few months. The numbers may have been “a little soft,” but they weren’t, “as bad as maybe the market had feared it could be considering the influence of the severe winter we’ve had in the U.S. coast-to-coast.”

Keiser also isn’t expecting a lot of change to forward guidance from Janet Yellen in her first meeting as chair of the Federal Reserve. He said the Fed wants to be out of QE3 by the end of the year, and the market is expecting that the overnight Fed funds rate won’t be touched in until the middle of next year at the earliest.