2012-10-24

Daily Market Commentary for October 24, 2012

The U.S. attorney for the Southern District of New York reported Wednesday they filed a civil lawsuit against Bank of America Corp. (BAC) for mortgage fraud, alleging BofA cooked up a new loan origination process called the "Hustle," designed to process loans "at high speed and without quality checkpoints." (read more at Millennium-Traders.Com)

http://www.millennium-traders.com/news/newscommentary.aspx

United Therapeutics Corp. (UTHR) shares were sharply lower by 14% into mid-afternoon trading after the Food and Drug Administration declined to approve their new drug application for an oral formulation of a drug to treat high blood pressure. United Therapeutics reportedly received a complete response letter from the FDA that declined to approve the company's application for oral treprostinil for the treatment of pulmonary arterial hypertension in its current form. The FDA questioned the clinical importance of the six-minute walk distance effect size shown in the company's Freedom-M study. The study showed the inability to demonstrate an improvement in time to clinical worsening in all three Phase III studies of oral trepostinil and the inability to demonstrate a statistically significant effect on the six-minute walk distance in two additional studies. The FDA said it was unsure whether an additional clinical study would alter its impressions and suggested that United Therapeutics should consider a fixed dose design as well as, more frequent dosing if the company undertakes an additional study. "We will continue using our best efforts to gain approval of oral treprostinil, and we will focus on doing so within the next four years," said Chairman and Chief Executive Martine Rothblatt.

Facebook Inc. (FB) shares surged higher on Wednesday, up 18% into mid-afternoon trading after Citi Research upgraded the stock to buy, praising the social network's quarterly report from a day earlier. "What investors have for the first time since the FB IPO is fundamentals acceleration WITH a reasonable valuation," analyst Mark Mahaney wrote in a note to clients. On Tuesday, Facebook reported a surge in advertising revenue as well as an increase in mobile monthly active users.

The U.S. Department of Commerce reported Wednesday, sales of new single-family homes in the U.S. rose 5.7% in September to a seasonally adjusted annual rate of 389,000, striking the highest pace since April 2010. The sales pace in August was revised lower, down to 368,000 from prior estimate of 373,000. Median sales price in September declined 3.2% to $242,400. The supply of new homes declined to 4.5 months at September's sales rate from 4.7 months in August. By region, sales during September fell only in the Midwest. Despite the gain in September, the pace of new home sales remains relatively low compared with a peak of almost 1.4 million in 2005.

Text of the Federal Open Market Committee statement issued by the Federal Reserve on Wednesday:
“Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has advanced a bit more quickly, but growth in business fixed investment has slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation recently picked up somewhat, reflecting higher energy prices. Longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and exceptionally low levels for the federal funds rate are likely to be warranted.”

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