Finances

Beaverton, Oregon-based athletic apparel maker, Nike, Inc. recently saw its stock prices reach an all-time high of more than $112. However, margin concerns and a backlog of inventory in China and European markets placed too much pressure on the stock causing it to drop by 3.2% to $107.45 in early afternoon trading Friday. On Thursday, Nike executives reported its third-quarter results. Nike reported that its gross margin narrowed by 2 full percentage points as inventory soared by more than double to 32%. Adding to troubles, Nike announced that while its fourth-quarter sales would likely increase, it will probably do so at less than expected rates. "Looking to the fourth quarter and beyond, we will see continued challenges from the global economy, mostly around unemployment, debt and currency issues brought on by political uncertainty," said Chief Executive Mark Parker on a conference call with analysts. "While some raw material costs are starting to ease, we have not seen them retreat to their previous levels. For other input costs, such as labor, upward pressure continues."

Nike does see a promising future ahead. Executives expect demand to increase with the start of the Summer Olympics in London. There, Nike will release its newest and lightest basketball jerseys and track and field suits. Nike also recently released its newest shoe offering, the Flyknit shoe that retails for $150.

Shares of Nike, Inc. (NKE) closed the week at $107.54.

Investors Skeptical of Peugeot-General Motors Alliance

Peugeot announced this week that it was suspending two of its development efforts as it focuses on a new alliance with troubled American automaker, General Motors. Peugeot announced that it will postpone its plans to develop a new dual clutch transmission gearbox at its Valenciennes, France factory and plans to develop and market a new compact car at its Madrid, Spain plant. "During this period, it has been decided to explore more economical ways for the group to develop a DCT gear box notably those offered through the alliance with GM," Peugeot officials said.

The joint development of the gear box is only one area of cooperation between GM and Peugeot. The two automakers will also develop a joint platform for full size vehicles, compact cars, low emission vehicles and a small vehicle designed specifically for emerging markets. The alliance is not sitting well with all GM investors. Many recall the failed alliance between GM and Fiat wherein GM was forced to pay Fiat $2 billion in order to exit the failed partnership. The current arrangement has GM spending $420 million for a 7% stake in the French auto maker. The current plan could cost GM upwards of $2 billion in development costs by 2017, even as the company acknowledges over-capacity in the European manufacturing industry. GM plans to offset some of its capacity problems by shuttering several plants in hopes of stopping the continuing losses it faces in that market which, so far, have exceeded $14 billion.

Shares of General Motors (GM) ended the week at $25.14. Shares of Peugeot (PEUGY) finished at $17.91

Home Builders Facing Losses, Led By KB Homes

KB Homes, one of the nation's largest home building corporations, released its first-quarter results showing a loss of $45.8 million or $0.59 per share on $254.6 million of revenue. A year earlier, the company's first quarter loss amounted to $114.5 million or $1.49 a share. Analysts anticipated a significant loss but expected it to come in around $0.24 per share on revenue of $338 million. Shares slumped by more than 15% in premarket trading Friday to finish the week a full 20% off its opening bid Monday.

"Reflecting the improving trends in the economy, including recent job growth and higher consumer confidence, we are seeing signs that the overall housing market is stabilizing and beginning to recover," Chief Executive Jeffrey Mezger said in the pre-market release. "The pace of the recovery is uneven, however, with certain local markets showing greater strength and more normalized activity than other areas where a rebound will take longer to manifest."

Its not just KB that is suffering. The industry as a whole is plagued by less demand for new construction and slow sales on existing homes. In fact, a report by the Commerce Department showed that pre-existing homes sales dipped by 0.9% in February while new home sales fell by 1.6%. Shares of Standard Pacific Corporation, PulteGroup, Inc., Beazer Homes USA, Inc. and the Lennar Corporation all posted losses ranging from 2.5% to 3.5% on Friday

Shares of KB Homes (KBH) finished the week at $10.21

The Dow started the week at 13,233 and closed at 13,081. The NASDAQ started the week at 3,055 and finished at 3,038.The S&P 500 started the week at 1,404 and ended at 1,397.

Treasury prices rose this week following yields hitting their highest rates since July of 2011 the week prior. An unwelcome slump in the housing market coupled with slowing manufacturing in China and weak results from a reading of the European purchasing manager's index have added to investor fears of global recession. Last week saw investors fleeing Treasuries for the more volatile securities markets after the Labor Department released a report showing a decline in unemployment claims.

Sales of Treasury Inflation Protected Securities (TIPS) kept the wider bond market higher following the sale of $13 billion in 10-year TIPS at a negative yield, only the second time for that note. The increase in global fuel costs and foodstuffs has some investors concerned about the implications of inflation in the economy. TIPS offer some comfort to these investors as they receive a fluctuating rate of return based upon inflation figures in addition to a coupon.

The 10-year Treasury note yield finished the week at 2.24% while the 30-year Treasury note yield finished the week at 3.31%.

Freddie Mac released the results of its Primary Mortgage Market Survey, showing mortgage rates increasing amid improving economic data. The average 30-fixed rate mortgage (FRM) averaged 4.08% for the week passing the 4% rate for the first time since October 2011, when it averaged 4.10%. The 15-year FRM this week averaged 3.30% with an average 0.8 point, up from last week when it averaged 3.16%. A year ago at this time, the 15-year FRM averaged 4.04%.

"Mortgage rates are catching up with increases in U.S. Treasury bond yields placing the average 30-year fixed mortgage rate above 4% for the first time since the end of October 2011," said Frank Nothaft, Freddie Mac's Vice President and Chief Economist. "Bond yields rose over the past two weeks in part due to an improving assessment of the state of the economy by the Federal Reserve, better than expected results of commercial bank stress tests and the likelihood of a second bailout for Greece. Meanwhile, consumers continued to reduce their debt burdens in the fourth quarter of 2011. For instance, homeowners reduced their financial obligations ratio (debt payments as a share of disposable income) to the lowest point since the second quarter of 1994."

The money market fund finished this week at 0.50%. The 1-year CD finished at 0.70%.