Wednesday was no exception in a week in which economic news left stocks mixed, but slightly down. Some data that a housing recovery is under way in the United States wasn't enough to overcome fears that European governments aren't moving decisively enough to pull Europe out of recession. But with the S&P 500 down nearly 0.6%, manufacturing and transportation actually performed slightly better, each down around 0.4%.
The Commerce Department announced mixed housing data Wednesday that pointed to a continued recovery, but nonetheless appeared to fall short of investor expectations. Median new home prices have reached their highest level in five years, but new single-family home sales decreased slightly from 374,000 to 373,000, less than 0.3%. Analysts had expected 380,000.
On the news, shares of homebuilders and the companies that supplied them were broadly down, after recent price recoveries. Masco (NYSE: MAS ) , a manufacturer of home-improvement products such as insulation, architectural coatings, and windows, was the hardest-hit, down 3.6% but still up more than 40% for the year.
Across the Atlantic, Ford (NYSE: F ) made news by announcing that it will cut a "couple hundred" jobs in its European plants, which are hemorrhaging money and expect to lose $1 billion this year. Shares were down 0.8%, as investors viewed this news skeptically. As I've argued before, Ford and other automakers must make much deeper cuts in Europe to respond to the weak demand the region is experiencing.
Demand will probably stay weak after European Central Bank governing council member Jens Wiedmann claimed Wednesday that the ECB cannot and should not provide additional relief to Greece should the country require it. That follows similar statements from another council member, and it comes on a day when anti-austerity protests in Spain tested that country's resolve to follow through on its obligations.
Perhaps pricing in continued sluggishness in demand, energy futures were down Wednesday, with light crude losing 1.3%. Cheaper fuel is good for plenty of companies, however, and shares of freight trucker Old Dominion (Nasdaq: ODFL ) were up 2.6%. Low fuel prices make highway truckers much more competitive with railroads, which are more fuel-efficient.
Airlines were also up broadly, as the cost of jet fuel takes up about a third of revenue industrywide. US Airways (NYSE: LCC ) was the strongest legacy airline, up 2.1% for the day. By far the best performer, shares of Alaska Air Group (NYSE: ALK ) were up more than 6%, after the company's board authorized a $250 million share-buyback program on Wednesday. If executed, the program would repurchase around 10% of Alaska Air's total market capitalization. The company has targeted December 2014 to complete the program.
Though investors liked the news, this analyst humbly suggests that a special dividend may have been a better use of cash on hand. Shares are trading within 10% of the company's 30-year high and are currently valued for over 50% more than their five-year average on an earnings basis.
The company has a history of buying its shares at overvalued prices. Since announcing its last buyback program in February, a $50 billion initiative that the company announced it had concluded on Wednesday, investors in Alaska Air have underperformed the S&P 500 by more than 10%. Since buybacks are intended to boost the share price, one can fairly surmise that Alaska Air wasted that $50 billion. Maybe it'll have better luck this time.
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