U.S. mortgage applications rise, but so do rates: MBA

NEW YORK, Wed Aug 7, 2013 — Potential buyers crept back into the U.S. housing market last week as applications for mortgages edged up, even though rates resumed their ascent, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 0.2 percent in the week ended Aug 2.

The gauge of loan requests for home purchases, a leading indicator of home sales, was stronger, adding 0.7 percent after falling in four of the past five weeks.

Appetite for mortgages has dropped over the summer, hurt by a surge in interest rates on the Federal Reserve’s plan to start slowing its economic stimulus later this year if the economy progresses as expected.

The Fed is currently buying $85 billion in bonds a month to keep borrowing costs low. The cheap mortgage rates have helped spur home buying and worries have emerged that higher costs could take some of the strength out of the housing market’s recovery.

U.S. judge approves Citigroup $590 million settlement

NEW YORK, Thu Aug 1, 2013 — A federal judge gave final approval Thursday to a $590 million settlement by Citigroup Inc. that resolves a shareholder lawsuit accusing the bank of hiding tens of billions of dollars of toxic mortgage assets.

“Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial,” U.S. District Judge Sidney Stein in Manhattan wrote in a 48-page opinion.

The settlement resolves claims by shareholders who purchased Citigroup shares from February 2007 to April 2008 that the New York-based bank misrepresented its exposure to securities known as collateralized debt obligations that were tied to mortgage investments.

Citigroup lost $27.68 billion in 2008. The lawsuit cited the plunge in the company’s stock price from $47.89 at the start of the fourth quarter of 2007 to $2.80 by January 2009.

The settlement was announced last August.

Chesapeake quarterly profit tops Street estimate

OKLAHOMA CITY, Okla., Thu Aug 1, 2013 — Chesapeake Energy Corp. reported a better-than-expected quarterly profit on Thursday as it produced more crude oil than Wall Street targeted.

Shares of Chesapeake rose 4 percent to $24.26 in premarket trading.

Chesapeake, the second largest U.S. producer of natural gas, said oil production in the quarter rose 44 percent to 116,000 barrels per day (bpd). It raised its crude output forecast for the full year.

Analysts at Bernstein Research had estimated Chesapeake’s oil production at 105,000 bpd in the quarter.

Second-quarter profit at the Oklahoma City-based company fell to $457 million, or 66 cents per share, from $929 million, or $1.29 per share, a year earlier.

But adjusting for one-time items, Chesapeake had a profit of 51 cents per share. Analysts, on average, expected 41 cents per share, according to Thomson Reuters I/B/E/S.

This is the first quarter that Chesapeake has reported earnings under CEO Doug Lawler, who was named to replace former CEO Aubrey McClendon in May.

Apple plans Nevada solar farm in clean energy push for data centers

CUPERTINO, Calif., Tue Jul 2, 2013 — Apple Inc. said it plans to build a new solar farm with NV Energy Inc. for power supply to its new data center in Reno, Nevada, a major step towards its goal of having its data centers run on renewable energy.

Apple and other technology companies such as Amazon.com Inc. and Microsoft Corp, that build and run computer server farms have come under criticism for their high consumption of electricity and other resources.

These data centers cater to an explosion in Internet traffic, streaming content through mobile devices and hosting of services to corporations.

The new solar farm will provide power to Sierra Pacific Power Co.’s electric grid that serves Apple’s data center and when completed will generate about hours 43.5 million kilowatt of clean energy a year, Apple said in a statement.

Apple already runs its largest data center in the U.S. on solar power. The center in Maiden, North Carolina produces 167 million kilowatt hours, the power equivalent of 17,600 homes for one year, from a 100-acre solar farm and fuel cell installations provided by Silicon Valley startup Bloom Energy.

Hyundai recalls 5,200 Azera sedans in U.S. for airbag sensor issue

DETROIT, Tue Jul 2, 2013 — Hyundai Motor Co. is recalling about 5,200 Azera sedans in the United States to address an issue where the airbag may deploy with less or greater force than needed in an accident.

The South Korean automaker is recalling the 2012 and 2013 model-year cars because the occupant detection system may fail to properly differentiate whether the front-seat passenger occupant is an adult, child or a child restraint seat, according to documents filed with the U.S. National Highway Traffic Safety Administration. The result could be the bags deploying with the incorrect force and that could lead to increased risk of injury.

Hyundai determined that a change in the fabric material on the sensor mat could impact the sensor’s ability to properly classify an occupant, NHTSA said.

A review of warranty claims found several instances indicating that the airbag warning light had illuminated with a diagnostic code for a wet seat, according to NHTSA.

Hyundai will notify owners and recalibrate the airbag system, NHTSA said. Hyundai expects to begin notifying owners in the third quarter.

Tenet Healthcare to buy Vanguard Health for $4.3 billion

DALLAS, Mon Jun 24, 2013 — U.S. hospital operator Tenet Healthcare Corp. will buy smaller rival Vanguard Health Systems Inc. for $4.3 billion including debt to expand into new geographies.

The offer of $21 per share represents a premium of 70 percent to Vanguard’s Friday close. Vanguard shares were up 66 percent at $20.51 in thin trading before the bell.

The companies said the deal includes the assumption of $2.5 billion of debt.

Tenet said it expects the deal to add to earnings in the first year and estimates annual savings of $100 million to $200 million.

“This acquisition will take Tenet into new geographic markets, expand the breadth of our service offerings, diversify our earnings sources and increase the benefits we expect to realize under healthcare reform,” Tenet CEO Trevor Fetter said in a statement on Monday.

Tenet has hospitals in California, Texas, several states in the U.S. Southeast and in Pennsylvania.

Vanguard owns and operates 28 acute care and specialty hospitals in the U.S. Midwest, South and Massachusetts.

U.S. hospital stocks have rallied this year as investors expect the companies to benefit from President Barack Obama’s healthcare reform that will expand insurance coverage to more Americans. The reform has also spurred consolidation in the sector.

Tenet has secured fully committed financing from Bank of America Merrill Lynch.

Home resales rise to three-and-half year high; prices jump

WASHINGTON, Thu Jun 20, 2013 — Home resales rose in May to the highest level in 3-1/2 years and prices jumped, a sign the housing sector recovery is gathering steam and could give the economy a significant boost this year.

The National Association of Realtors said on Thursday that existing home sales advanced 4.2 percent to an annual rate of 5.18 million units, the highest level since November 2009 when a home-buyer tax credit was expiring.

“Whatever inventory is coming onto the market, buyers are ready to snap it up,” said Lawrence Yun, an economist at the NAR.

The increase beat expectations for a rise to a 5 million-unit rate last month.

The housing market is one of the brightest spots in America’s economy and is helping counter Washington’s decision to raise tax rates and cut government spending this year.

A very accommodative monetary policy by the Federal Reserve, which has held mortgage rates near record lows, is helping to lift the housing market off the floor. Fed Chairman Ben Bernanke, however, gave clear signals on Wednesday that the Fed was on track to start dialing back its stimulus by the end of this year.

In May, the median home sales price increased a whopping 15.4 percent from a year ago to $208,000. That was the biggest year-over-year increase since 2005 and left prices at their highest level since July 2008.

“Prices have recovered quite suddenly and quite spectacularly,” Yun said.

Procter & Gamble reorganizes businesses under four units

CINCINNATI, Thu Jun 6, 2013 — Procter & Gamble Co. , the world’s largest household products maker, has announced a reorganization amid speculation by analysts that the heads of its new units are in the running to replace CEO A.G. Lafley.

The maker of Tide laundry detergent and Gillette razors brought back Lafley as chief executive in May, as it came under pressure from investors to pick up the pace of improvements.

In an expected move, the company will split its household care and beauty and grooming units into four sectors starting July 1: Global Baby, Feminine and Family Care; Global Beauty; Global Health and Grooming; and Global Fabric and Home Care.

“We expect this structure to facilitate faster global expansion of brand and product innovations to win with customers,” Lafley said in a statement.

“The individuals who are reporting directly to Lafley are obviously potential candidates to be named to the top spot,” said Morningstar analyst Erin Lash, adding that she expects Lafley to be a caretaker CEO.

Martin Riant, Deborah Henretta, David Taylor and Giovanni Ciserani will lead the units as group presidents. They are assuming additional duties with the change, and will report directly to Lafley.

The company also said that Charles Pierce will assume responsibilities for New Business Creation and Innovation from Jorge Mesquita, who is leaving the company. Pierce will report to Lafley in that additional role.

Also on July 1, Dimitri Panayotopoulos, current vice chairman for Global Business Units, will assume the role of vice chairman and adviser to the chairman and CEO. He will continue to report to Lafley.

Melanie Healey, group president of North America and Global Hyper, Super and Mass Channel, will begin reporting to Lafley in addition to Werner Geissler, vice chairman, Global Operations, who also reports to the CEO.

“I think there will be more changes to come, too. This is really only a signal of who the successors are,” Sanford Bernstein analyst Ali Dibadj said.

As Facebook grows up, grand ambitions get reality check

SAN FRANCISCO, Wed Jun 5, 2013 — Facebook, which once seemed poised to take over the Internet, is showing its limitations: a host of newer services are gaining ground among trend-setting youth; a much-hyped smartphone app has received a tepid response; and grand ambitions such as taking on Google in the search business seem ever more fanciful.

In a volatile Internet industry where companies can rise and fall almost overnight, one might even say that the nine-year-old Facebook Inc. is suffering a mid-life crisis.

Yet even if the social network falls short of its goal of becoming an all-encompassing Web destination that consumers turn to for everything from messaging to shopping, experts say Facebook has likely achieved enough scale and ubiquity to assure its staying power.

“They’ve gotten so big that it’s one of those things you have to use,” said Dan Niles, chief investment officer of tech-focused hedge fund firm AlphaOne Capital Partners, which does not have a Facebook position. “You may not like the electricity company but I guarantee you you’re still getting electricity.”

Concerns that Facebook is losing its grip on consumers, underscored by a recent report from Pew Research that showed declining enthusiasm among some teens, have kept a lid on the company’s share price even as stock markets rallied. Facebook shares closed at $23.52 on Tuesday, near their six-month low and almost 40 percent below the company’s May 2012 IPO price.

Brokerage firms debate value of Certified Financial Planner title

NEW YORK, Mon Jun 3, 2013 — Some of Wall Street’s biggest brokerage firms are at odds over the bottom-line returns of a three-letter credential they are vigorously promoting to their brokers.
The CFP (for certified financial planner) title is conferred by the nonprofit Certified Financial Planner Board of Standards, which touts it as “the standard of excellence for competent and ethical personal financial planning.”
The insignia has become a popular addition to brokers’ business cards since clients were traumatized by the market collapse of 2008. With consumer faith in brokers’ investment skills shaken – and commissions for simple buy and sell orders slipping – brokers are positioning themselves as trusted advisers that help clients meet goals ranging from saving for college to estate planning.
Yet while some firms are pushing their brokers to earn the CFP credential as a way of attracting clients and profits, others say the bottom line benefits have not been proven.
Over the last five years, the number of CFP holders has grown 23 percent to 68,0000, about half of whom work at the 50 largest financial services firms, said Joe Maugeri, director of firm relations at the CFP Board. Firms pushing advisers to get the license range Bank of America Corp.’s Merrill Lynch to Charles Schwab Corp., which traditionally offered little direct advice to clients.
Even firms that disdain working with people with less than $250,000 to invest are pitching to wealthier clients with the kind of college-and-retirement planning talk traditionally aimed at the less well-to-do by insurance sales people.