Solid Econ Data (and Even Walgreen Earnings) Not Enough to Save the Dow

The two things you need to know on June 25.

Jun 24, 2014 at 11:00PM
Ouch. Wall Street's recent string of poor performances makes us want to bite someone like we're Uruguayan soccer players. Despite some solid econ data, investors are selling down stocks after last week's gains, as the Dow Jones Industrial Average fell 119 points Tuesday for its worst loss in a month.

1. Walgreen earnings rise, but CEO ponders Switzerland move
The Swiss Alps are beautiful for skiing and for U.S. companies seeking a tax vacation. So when Illinois-based Walgreen (NASDAQ:WBA) announced $722 million in earnings for the March/April/May quarter, which was up from the year before, investors were more interested in their plans to pack up and leave for Switzerland.
In a conference call with analysts, the CEO mentioned that Walgreen is thinking about buying more shares of the European pharmacy company that it already owns 45% of. The Swiss drug store is called Boots, and if Walgreen owns a majority of it, then it can easily boot the U.S. taxman out its pocket and move its official headquarters to Switzerland. That would grant the CEO an office with a fine view of Swiss yodelers and a lower tax rate.
Buying a company to move your HQ is called "tax inversion." New York City-based Pfizer was trying to do that when it sought to acquire British-based AstraZeneca -- and that got the Walgreen CEO to thinking. When Walgreen bought 45% of Alliance Boots AG in 2012 for over $6 billion (probably for the lucrative Ricola cough drops so popular among downhill skiers), it maintained the option to buy the rest by 2016.
Buying out 55% of a company is a MarketSnacks-worthy story already. But the possible USA-for-Switzerland tax swap proposal (especially during the patriotic craze of the World Cup) puts an extra Wall Street spotlight on the news. Walgreen's stock performance has been really strong (up 26% year to date), but investors were mixed Tuesday on the surprising move, so they sent the stock down 1.7%.

2. Housing data and consumer confidence looked sharp
"Two-for-Tuesday" was the theme of econ data investors got to enjoy. A combination of solid housing market numbers and consumer-related polling were positive signs for the U.S. economy heading into the summer heat.
First up, sales of new homes in May surged 18.6% to an annual rate of 504,000 new homes sold. Not only did that punch economists' lowly expectations, but it also followed Monday's impressive report that existing-home sales enjoyed their best monthly gain since 2011.

Plus, according to the research firm The Conference Board and its monthly survey, consumer confidence rose again in June as Americans increasingly observe "better business conditions" nationwide. In particular, investors were happy to see optimists outweighing pessimists according to the polling.

The takeaway is that winter weather was an ice cream headache for both the housing market and consumer spending. Now that spring has sprung, the econ data is showing both areas of the economy regaining their recovery-leading footing, even if Wall Street didn't celebrate the news with a stock market win on Tuesday.

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