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Friday, August 25, 2006

Wall St Covers Lowes With A Vacuum, And Sucks Out The Air

Stocks: (LOW)

First there news appeared the existing home sales dropped to a two-and-a-half year low. Then, the supply of homes for sales hit an all-time high. Finally, new home sales dropped.

Lowes hit a 52-week low today at $26.15, down from a period high of $34.85.

The homebuilding supplier's last quarter was not terribly grim. Revenu rose 12% to $13.4 billion and earnings were up 11%. But, the company guided that same store sales could be as low as 2% for the year.

But, there is just a whiff in the air that things could get worse, much worse. Nouriel Roubini, the economist, told MarketWatch that we may be at the beginning of the economic end:The United States is headed for a recession that will be "much nastier, deeper and more protracted" than the 2001 recession.

And, ancient financial writer Dan Dorfman, writing for the New York Sun quoted a Raymond James analyst as saying that "the ongoing collapse of residential real estate has far-reaching implications for both the economy and the stock market".

Right now, the idea of a hard landing is a minority view. But, that could change quickly over the next month or two if there is evidence that the housing market malaise is starting to throttle back consumer spending.

If there is any indication that Lowes same store sales are moving into negative figures year-over-previous year, the ugly collapse in its share price would get much worse.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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