Freddie Mac also noted a -14.1% annualized drop in the size of its mortgage portfolio to $2.03 trillion. That’s the largest decline by far in the past 12 months and represents a nearly 5x reduction over the March annualized rate drop of -2.9%.

Freddie Mac was taken over by the federal government in September 2008 and has been operating ever since as a conservatorship.

The mortgage volume study is available here.

Surprisingly, given recent tepid reports on job growth, consumers continue to expect steady, if slow, job increases. From the announcement:

In each of the past three months, a majority of consumers reported an improved economy, and twice as many expected further improvement rather than renewed declines in the year ahead. Most consumers, however, expected the gains to be modest. Confidence in the government’s economic policies remained relatively low, with 41% holding negative views.

Consumers’ view on current conditions rose by 5.2% month-over-month to 87.2, supported by lower prices for durable goods. A significant majority — 72% — of those surveyed said now is a good time to buy a new car.

The index reading on future conditions shows a less-optimistic 2.8% month-over-month gain to 74.3. The coming national elections and the forthcoming political battle over the country’s debt ceiling are the likely causes of the more temperate view of future conditions.

Paul Ausick

The second quarter will be two-thirds over when Memorial Day comes. Many economists believe that economic activity slowed in the quarter. Jobless rates on a national basis barely improved. Housing data show that home prices may have bottomed throughout much of America, but the bottom is a soft one. Americans also have started to think about whether Congress will allow tax cuts to lapse, which would hurt the spending power of much of the middle class. Deciding to spend money this weekend will not be easy.

Douglas A. McIntyre

More generally, there are several reasons to think that inflation will remain moderate and close to our objective. First, and most obviously, the economy continues to operate with significant slack. Second, measures of underlying inflation show little upward pressure. In fact, one—the Federal Reserve Bank of New York’s Underlying Inflation Gauge—is turning down. This measure uses a very wide set of variables to forecast the underlying inflation trend. Third, it is hard to be very concerned about inflation risks when the growth rate of nominal labor compensation is so low and stable. It is noteworthy to me that the employment cost index has risen only 2.1 percent over the past four quarters and has shown no acceleration. Fourth, inflation expectations remain well-anchored. This is critically important because inflation expectations are an important driver of actual inflation outcomes. Taking into account the current stance of monetary policy, I anticipate that inflation will decline to slightly below our 2 percent long-run objective over the next few years.

Dudley said this means that this means that the Fed Funds rate will stay “exceptionally low” at least through late 2014. Dudley’s assumption is that job recovery won’t happen fast enough to meet the Fed’s dual mandate of keeping inflation in check while supporting full employment:

Given our forecast of stable prices and a still slow path back to full employment, there is an argument for easing further. But, unfortunately, our tools have costs associated with them as well as benefits. Thus, we must weigh these costs against the benefits of further action.

As long as the U.S. economy continues to grow sufficiently fast to cut into the nation’s unused economic resources at a meaningful pace, I think the benefits from further action are unlikely to exceed the costs. But if the economy were to slow so that we were no longer making material progress toward full employment, the downside risks to growth were to increase sharply, or if deflation risks were to climb materially, then the benefits of further accommodation would increase in my estimation and this could tilt the balance toward additional easing.

The full text of Dudley’s remarks are available here.

Paul Ausick

When the stores reported first quarter earnings, the preponderance of guidance pointed to slower sales in the second quarter likely based on sales pulled forward into the first quarter due to warm weather. But it could be the case that falling gasoline prices are giving sales a lift in May that could continue through June. According to the latest report from Retail Metrics, retailers are on track to post a comparable store sales gain of 3.6% in May, excluding the negative effect of lost sales at Walgreen Co. (NYSE: WAG) due to its being dropped by pharmacy benefits management firm Express Scripts Inc. (NASDAQ: ESRX).

We looked at a dozen retailers with an eye toward discerning value opportunities for investors: Costco Wholesale Corp. (NASDAQ: COST), Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), Macy’s Inc. (NYSE: M), Kohl’s Corp. (NYSE: KSS), J.C. Penney Company Inc. (NYSE: JCP), Gap Inc. (NYSE: GPS), Limited Brands Inc. (NYSE: LTD), American Eagle Outfitters Inc. (NYSE: AEO), Abercrombie & Fitch Inc. (NYSE: ANF), The TJX Companies Inc. (NYSE: TJX), and Dollar General Corp. (NYSE: DG).

Costco Wholesale Corp. (NASDAQ: COST) traded at $84.14 and has a market value of around $37 billion. The consensus target price from Thomson Reuters is $86.83 and the 52-week range is $70.22-$92.10. Costco has a dividend yield of 1.3%. The implied upside to the consensus target is just 3%, and we would note that the target is below the 52-week high.

Wal-Mart Stores Inc. (NYSE: WMT) traded at $64.65 and has a market value of around $220 billion. The consensus target price from Thomson Reuters is $65.28 and the 52-week range is $48.31-$64.88 (new high set today). Walmart has a dividend yield of 2.5%. The implied upside to the consensus target is barely 1%, but we would note that the target is still above the 52-week high.

Target Corp. (NYSE: TGT) traded at $56.84 and has a market value of around $38 billion. The consensus target price from Thomson Reuters is $63.65 and the 52-week range is $45.28-$58.95. Target has a dividend yield of 2.1%. The implied upside to the consensus target is 12%, and we note again that the target is above the 52-week high.

Durable Goods looks in line with estimates on the surface, but the Commerce Department report shows continued economic concern on the spending of big-ticket items if you look inside the data.  The headline data is up 0.2% to $215.53 billion on Durable Goods against a consensus of -0.3% from Dow Jones.  The report for March was revised from a prior reading of -4% to -3.7%.

Where the Durable Goods data gets murky is that the ex-transportation durable goods data was down by -0.6% as cars and parts were in higher demand; the ex-data on a non-defense spending basis was -1.9%. We also saw the first drop in unfilled orders in over a year but that was only -0.1% and it may signal another weak number in the May report due next month.

Weekly jobless claims were down by 2,000 to 370,000 according to the Labor Department.  Last week’s report was revised to 372,000 from 370,000. This figure is right in line with estimates as Bloomberg had a consensus of 371,000.

The four-week average was down 5,500 to 370,000 and the army of unemployed measured by the continuing jobless claims fell by 29,000 to 3.26 million in the prior week.

Today’s economic data appears to be offering no significant read for overall growth versus contraction arguments.

JON C. OGG

On an adjusted basis H-P turned in earnings of $0.98 EPS on total sales of $30.69 billion.  This was above its prior guidance of $0.88 to $0.91 per share and above the consensus from Thomson Reuters of $0.91 EPS and $29.9 billion in revenues.

HP showed the following in PC and tech sales:

• Personal Systems Group revenue was flat year over year with a 5.5% operating margin.
• Commercial revenue increased 3%
• Consumer revenue declined 4%
• Workstations revenue was down 1%
• Desktop units were up 5%
• notebook units were down 6%
• total units were down 1%.

Results elsewhere are as follows:

• Services revenue declined 1% year over year with an 11.3% operating margin
• Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin.
• Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin.
• HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume.
• Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy… but it noted “Autonomy saw a significant decline in license revenue.”

HP spent $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in open market transactions and the company exited the quarter with $8.7 billion in gross cash.

Cutting another 8% of the workforce in the coming year or more is not going to come without pain.  What is also helping is that the crummy news coming out of Dell caused Dell’s worst day in a decade or more and that set the bar very low for H-P.  H-P closed down 3.2% at $21.08 against a prior 52-week low of $21.28, but shares are up 5.7% at $22.33 in the after-hours session.

Microsoft Corporation (NASDAQ: MSFT) is not winning with H-P perhaps on lower total unit sales.  Shares closed down 2.2% at $29.11 and the stock is at $29.04 in the after-hours.  Intel Corporation (NASDAQ: INTC) is facing the same after a 2.3% drop to $25.44 today and the after-hours session is down at $25.35.

JON C. OGG

The euro put up a 22-month low versus the dollar today, trading at 1.2544 briefly before recovering slightly to 1.2570. It is not inconceivable that the euro could fall below the 2010 low of $1.18.

Meanwhile, the Japanese yen rose to 79.4100 versus the greenback after the Japanese central bank declined to adopt additional quantitative easing measures. The Bank of Japan also left interest rates unchanged. Combined with the sinking euro the Japanese yen could strengthen to 70 to the dollar as currency traders look for a safe haven outside Western Europe and the US.

Gold, the once and perhaps future safe haven of last resort, lost -1.8% today. It seems that only paper money is worth anything these days.

Paul Ausick

We’ve looked at five conglomerates that offer some upside: General Electric Co. (NYSE: GE), 3M Co. (NYSE: MMM), United Technologies Corp. (NYSE: UTX), Honeywell International Inc. (NYSE: HON), and Tyco International Ltd. (NYSE: TYC).

With one exception, implied upside for these companies wanders in the mid- to high-teens. The exception is United Technologies. The second-lowest of the five is Tyco, the de-conglomerated conglomerate.

General Electric Co. (NYSE: GE) traded at $19.06 and has a market value of $203 billion. The consensus target price from Thomson Reuters is $22.57 and the 52-week range is $14.02 to $21.00. GE has a dividend yield of 3.6%. The implied upside to the consensus target is 18%, but we would note that the target is above the 52-week high.

3M Co. (NYSE: MMM) traded at $83.38 and has a market value of around $58 billion. The consensus target price from Thomson Reuters is $95.47 and the 52-week range is $68.63 to $98.19. 3M has a dividend yield of 2.8%. The implied upside to the consensus target is 14.5%, but we would note that the target is also above the 52-week high.

United Technologies Corp. (NYSE: UTX) traded at $73.37 and has a market value of around $67 billion. The consensus target price from Thomson Reuters is $94.60 and the 52-week range is $66.87 to $91.83. UTX has a dividend yield of 2.6%. The implied upside to the consensus target is 29%, but we would note that the target is also above the 52-week high.

Honeywell International Inc. (NYSE: HON) traded at $56.72 and has a market value of around $44 billion. The consensus target price from Thomson Reuters is $67.56 and the 52-week range is $41.22 to $62.00. Honeywell has a dividend yield of 2.6%. The implied upside to the consensus target is 19%, but we would note that the target is also above the 52-week high.

Tyco International Ltd. (NYSE: TYC) traded at $53.59 and has a market value of around $24 billion. The consensus target price from Thomson Reuters is $62.20 and the 52-week range is $37.39 to $57.75. Tyco has a dividend yield of 1.9%. The implied upside to the consensus target is 16%, but we would note that the target is also above the 52-week high.

Based on these numbers, United Technologies offers the most potential upside, but the thing to keep in mind that its acquisition of Goodrich Corp. (NYSE: GR), which is set to close by mid-year, will leave the company with a large debt and not the brightest prospects for profit growth for another year or so.

Tyco, with the lowest implied gain at 16%, is splitting itself into three pieces. The company expects to complete the spin-off of its home security division into The ADT Corp. later this year as well as the spin-off of the fire and security division and the spin-off and merger of the flow control business with Pentair Inc. (NYSE: PNR). All these moves pushed the stock to a year-to-date gain of 20% in late March, which has since been ratcheted back to 15%. And over the past 12 months, only Tyco has shown an increase in share value, up more than 11%.

GE, with its 3.6% dividend yield, and implied upside of 18% is a safe choice here. 3M, with the lowest upside potential, and Honeywell are about equal otherwise. United Technologies has the most potential upside, but it may take a while to materialize. Overall, Tyco, which has withstood the fall in prices better than any of the others, may offer the best reward sooner than any of the others.

Gold & Silver Miners with the Most Upside Value

Major Oil Companies with the Most Upside Value

Industrials with the Most Upside Value

Paul Ausick

24/7 Wall St. has gone through the industrial products, chemicals, and heavy equipment makers to see which outfits offer investors the least risk and most reward.  Consensus targets are from Thomson Reuters and we have evaluated the following: Air Products & Chemicals Inc. (NYSE: APD); The Boeing Company (NYSE: BA); Caterpillar Inc. (NYSE: CAT); Deere & Company (NYSE: DE); The Dow Chemical Company (NYSE: DOW); E. I. du Pont de Nemours and Company (NYSE: DD); Danaher Corp. (NYSE: DHR); and Illinois Tool Works Inc. (NYSE: ITW).

Air Products & Chemicals Inc. (NYSE: APD) traded at $79.50 with a market value of $16.8 billion.  The consensus target price from Thomson Reuters is $98.75 and the 52-week trading range is $72.26 to $98.00.  Air Products’ most recent yield was listed as 3.2%. The implied upside to the consensus target is 24% but we would note that the consensus target is still above the 52-week high.

The Boeing Company (NYSE: BA) traded at $71.05 with a market value of $53.2 billion.  The consensus target price from Thomson Reuters is $86.08 and the 52-week trading range is $56.01 to $78.35.  This DJIA component’s most recent yield was listed as about 2.5%. The implied upside to the consensus target is 21% but we would note that the consensus target is almost $8.00 higher than the 52-week high and you have to go back to before the recession to find Boeing shares that high.

Caterpillar Inc. (NYSE: CAT) traded at $91.25 with a market value of $59.5 billion.  The consensus target price from Thomson Reuters is $130.95 and the 52-week trading range is $67.54 to $116.95.  Caterpillar’s most recent yield was listed as 2.0%. The implied upside to the consensus target is 44% but we would note that the consensus target is almost 10% above the 52-week high.

Deere & Company (NYSE: DE) traded at $74.50 with a market value of $30 billion.  The consensus target price from Thomson Reuters is $92.79 and the 52-week trading range is $59.92 to $89.70.  Deere’s most recent yield was listed as 2.4%. The implied upside to the consensus target is about 25% but we would note that the consensus target is about $3.00 higher than the 52-week high.

The Dow Chemical Company (NYSE: DOW) traded at $30.00 with a market value of $35.9 billion.  The consensus target price from Thomson Reuters is $37.23 and the 52-week trading range is $20.61 to $37.30.  Dow’s most recent yield was listed as a very high 4.2%. The implied upside to the consensus target is 24% but we would note that the consensus effectively is the same as the 52-week high.

E. I. du Pont de Nemours and Company (NYSE: DD) traded at $48.40 with a market value of $45.3 billion.  The consensus target price from Thomson Reuters is $58.33 and the 52-week trading range is $37.10 to $56.20.  DuPont’s yield was listed as about 3.5%. The implied upside to the consensus target is 20% and that target is about $2.00 above the 52-week high.

Danaher Corp. (NYSE: DHR) traded at $51.85 with a market value of $35.9 billion.  The consensus target price from Thomson Reuters is $60.95 and the 52-week trading range is $39.34 to $56.45.  Danaher’s most recent yield was tiny at only 0.2%. The implied upside to the consensus target is only about 17% and it is worth noting that the analyst consensus target is more than $4.00 above the 52-week high.

Illinois Tool Works Inc. (NYSE: ITW) traded at $54.40 with a market value of $26 billion.  The consensus target price from Thomson Reuters is $61.53 and the 52-week trading range is $39.12 to $59.27.  ITW’s most recent yield was listed as 2.6%. The implied upside to the consensus target is only about 13%, making this the least ‘implied upside’ winner of the lot.  This one is also only down about 8% from its most recent high as well.

You can see that there is a very mixed bag here.  The Dow Chemical Company (NYSE: DOW) leads in the dividend department with a 4.2% yield.  Caterpillar Inc. (NYSE: CAT) is the leader with ‘implied analyst upside’ of 44% but it seems a stretch in the upside if you look at where the stock has been and how volatile the stock has been.  Illinois Tool Works Inc. (NYSE: ITW) has the least amount of ‘implied analyst upside’ but it has also held up among the best during the market sell-off.

Gold & Silver Miners With Most Upside & Value

Major Oil Companies WIth Most Upside & Value

Conglomerates With Most Upside & Value

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JON C. OGG