For Immediate Release
Chicago, IL – December 23, 2011 – 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 Yahoo ( YHOO), Vivus ( VVUS), Tibco Software ( TIBX), Micron Technology ( MU) and Bank of America Corporation ( BAC).
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Here are highlights from Thursday’s Analyst Blog:
Econ Data: The Good, the Bad & the So-So
Today’s heavy economic schedule will likely keep the markets focused on domestic matters. The good start provided by the positive Initial Jobless Claims report should help give stocks positive momentum today. The GDP revision was on the weak side, but given the stale nature of the data and the relatively no-so-bad internals of report, stocks will most likely take it in stride.
Other key economic reports on deck for a little later release include the Conference Board’s Leading Indicators and a final read on the University of Michigan Consumer Sentiment survey for December.
Of the pre-market releases, the most favorable reading was on the Initial Jobless Claims front, which continued the positive momentum of the last few weeks by falling to the lowest level since April 2008. Contrary to expectations of some sort of a give-back following the sharp drop in the two weeks, we got another 4K drop, taking the weekly initial claims level further down to 364K. The four-week average dropped 8K to 380K.
There had been some skepticism in the market over the pronounced downtrend in initial jobless claims over the last two weeks, given the inherent complications in adjusting data at this time of the year for seasonal factors. With claims declining for three weeks in a row and reaching levels not seen since 2008, I would expect this downtrend to get more credibility. At a minimum, I would expect this to cause upward revisions to monthly jobs numbers in the coming days.
The GDP report was not good relative to expectations. The market expected this final read on the third quarter GDP to come in ‘unchanged’ at 2%, but instead we got a 1.8% reading. Personal Consumption Expenditures (AMEX:PCE - News), or simply consumer spending -- the biggest component of the GDP, accounting for close to 70% of the total -- got revised down to 1.7% from 2.3%.
Driving the negative PCE revision was a drop in consumption of services, particularly healthcare services (are people getting healthier?). Business investment numbers were quite good, producing another quarter of double-digit growth.
Bottom line, the negative revision to the third quarter growth number doesn’t look good. But I wouldn’t mind the negative revision if it is primarily because Americans are spending less at the hospitals and clinics. I would rather have them spend money at the mall, eat out and watch movies than be in the waiting room for their primary care physicians.
I don’t see the third quarter GDP revision having an negative impact on current estimates for the fourth quarter, which is running in the 3.5% range at present.
In corporate news, Yahoo ( YHOO) is reportedly contemplating cutting its 40% stake in Alibaba Group. Shares of Vivus ( VVUS) will likely be in the spotlight as the company’s proposed diet drug has reportedly come up against a safety issue. On the earnings front, we have negative surprises from Tibco Software ( TIBX) and Micron Technology ( MU).
BofA Settles Countrywide Charges
In one of the largest settlements by any financial institutions in the history, Bank of America Corporation ( BAC) has agreed to pay nearly $335 million to settle civil charges against its Countrywide Financial unit. The Department of Justice (DoJ) made this announcement on Wednesday. The settlement agreement was filed with the central district court of California and still subject to court approval.
BofA had acquired Countrywide back in 2008, when the economic crisis was at its peak. The lawsuit against Countrywide states that the company had used discriminating lending practices against qualified African-American and Hispanic borrowers on home loans. Attorney General Eric Holder affirmed that these minority borrowers, who qualified for traditional mortgage rates, were pushed into subprime loans with higher interest rates.
After reviewing nearly 2.5 million loans, including loan terms and creditworthiness of the borrowers, the DoJ revealed that Countrywide has overcharged (higher fees and interest rates) about 200,000 minority borrowers in 41 states and the District of Columbia compared with white borrowers with similar credit profile. Additionally, Countrywide also tricked more than 10,000 creditworthy minorities into more expensive subprime loans. Majority of these victims were not even aware of this partiality and the trap they were falling into.
The settlement amount paid by BofA would be distributed between aggrieved borrowers. In addition, those who were wrongly steered into subprime loans will get a higher compensation. However, there will be no relief for those borrowers who paid higher interest rates.
The settlement deal with BofA came nearly 5 years after the DoJ had received a referral from the Federal Reserve that described about Countrywide’s involvement in discrimination against minorities. Under the federal civil rights, Fair Housing laws and Equal Credit Opportunity Acts, a lending practice is illegal if it has an unequal impact on minority borrowers.
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