Closing Bell: Stocks Give Up Early Gains Over Turmoil in Egypt

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U.S. stocks reversed early gains Tuesday, after news reports of political turmoil in Egypt overshadowed upbeat news about the nation's economy.

News that Egypt's military had drawn up plans to suspend the country's constitution, dissolve its legislature and set up an interim government ended a rally driven by good news about U.S. car sales, home prices and manufacturing.

The Dow Jones industrial average (^DJI) lost 42 points (0.3 percent) to end the day at 14,932, while the S&P 500 (^GPSC) declined less than a point to 1,614 and the Nasdaq (^IXIC) dropped 1 point to 3,433.

U.S. buyers snapped up new cars and trucks in June at a pace not seen since before the recession. Continuing demand for big pickups helped boost sales for Detroit's automakers. Ford said its sales rose 14 percent, while Chrysler gained 8 percent and General Motors rose 6.5 percent. Among Japanese carmakers, sales at Nissan sales jumped 13 percent, while Toyota and Honda each saw theirs rise 10 percent. South Korea's Hyundai reported a record June, with sales up 2 percent.

U.S. home prices jumped 12.2 percent in May from a year ago, the most in seven years. Data provider CoreLogic said Tuesday that home prices rose from a year ago in 48 states, falling only in Delaware and Alabama. And all but three of the 100 largest cities reported price gains.

Orders to U.S. factories rose in May, helped by a third straight month of stronger business investment. The gains suggest manufacturing may be picking up after a weak start to the year.

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The CEO of an California-based mortgage-services firm has been sentenced to more than three years in prison for running a Ponzi scheme that bilked more than $6.7 million from more than two dozen investors. The U.S. Attorney's office said David Lee Hardin Jr., 59, was also ordered to pay $1.5 million in restitution at his sentencing Monday. Hardin is the CEO and majority shareholder of a group of companies, including Covenant Mortgage, Covenant Marketing, Covenant Debt Solutions, Covenant Insurance and HRE Mortgage.

A former Tiffany & Co. (TIF) executive is accused of stealing 164 items, including diamond bracelets, earrings and rings, from the iconic jeweler's midtown Manhattan headquarters, and reselling them for more than $1.3 million. Former vice president of product development Ingrid Lederhaas-Okun was arrested at her home in Darien, Conn. She was to appear later in the day in federal court in Manhattan to face charges of wire fraud and interstate transportation of stolen property.

Dish Network (DISH) is offering free, live TV to passengers of Southwest Airlines (LUV). Dish will pay for the service, viewed on customers' own Internet devices, until the end of the year. Southwest had been offering a similar service on its flights for $5 a day. The deal doesn't include Internet access, however, for which Southwest charges $8 a flight.

The Federal Trade Commission said it has fined billionaire Barry Diller $480,000 tied to complaints that he didn't submit the required regulatory filings when he acquired voting shares in the Coca-Cola (KO) in 2010 and 2012.

Among stocks making big moves:
  • Achillion Pharmaceuticals (ACHN) fell $2.09, or 25 percent, to $6.27 after the drug developer said regulators Monday placed a hold on an early stage study involving its potential hepatitis C treatment.
  • DaVita HealthCare Partners (DVA) fell $7.10, or 5.9 percent, to $114.05, after the government proposed cutting the rates of Medicare payments to dialysis service providers.
  • General Motors (GM) and Honda Motor (HMC) are joining forces to develop hydrogen fuel cell vehicles. The two companies said they plan to develop new hydrogen storage and fuel cell technologies by 2020, and also push for more hydrogen fueling stations.
  • SanDisk (SNDK) is spending $307 million to acquire Smart Storage Systems, a developer of enterprise solid-state memory drives. Smart Storage has been owned since 2011 by investment-firm Silver Lake Partners. SanDisk shares gained 0.3% to end the day at $61.59.
  • U.S. automaker Ford Motor (F) got a boost after reporting its best June sales since 2006. Shares of the Dearborn, Mich.-based automaker rose 44 cents, or 2.8%, to $16.18. Ford said sales rose 13% in June on big gains in sales of pickups and small cars.
  • Zynga's decision to hire Microsoft's Don Mattrick as CEO sent the troubled online gaming company's stock higher for the second day as one analyst called it "too strange not to be true" but also "a bit odd." Zynga (ZNGA) stock added 20 cents to end at $3.27. Mattrick, who hails from Microsoft's (MSFT) interactive entertainment division, which houses the Xbox, starts his new job Monday. Mark Pincus, who founded Zynga in 2007, will remain chairman and chief product officer.
  • French authorities have confirmed that investigators raided Apple stores across France last week as part of an ongoing probe. The agency in charge of the investigation said it is scrutinizing Apple's relationships with its distributors, following complaints that the company favors its own stores at the expense of independent distributors. Apple (AAPL) stock rose $9.27 to $418.49.
  • A New York judge has refused to dismiss the state attorney general's lawsuit claiming back sales taxes and triple damages from Sprint Nextel (S). The court says the state has a valid basis for claims under state tax law, which imposes a 4 percent tax on aggregated mobile communications services. Sprint, which is being acquired by China's SoftBank, rose about 1% to $7.14.
What to watch Wednesday:
  • U.S. markets close at 1 p.m. ET in advance of Thursday's Fourth of July holiday, when markets are closed. The New York Stock Exchange and other bourses resume normal trading hours Friday.
  • Payroll-processor ADP releases data on private-sector hiring for June at 8:15 a.m.
  • The Labor Department reports weekly jobless claims at 8:30 a.m. (The release is normally scheduled for Thursdays but was moved ahead a day because of the July Fourth holiday.)
  • At 10 a.m., Freddie Mac releases weekly mortgage rates, and the Institute for Supply Management releases its service sector index for June.

Compiled from staff and wire reports.

Closing Bell: Stocks Give Up Early Gains Over Turmoil in Egypt
Warning stat: The price of college textbooks is up over 800 percent since 1978.

What the experts say: "The cost of college textbooks has been rising at almost twice the rate of general CPI inflation for at least the last 30 years," according to Mark J. Perry, American Enterprise Institute. "As Glenn Reynolds reminds us, 'a process that cannot go on forever, won't,' and the college textbook bubble is certainly one of those processes."
 

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Warning stat: First tier cities Beijing and Guangzhou saw home prices rise 3.1 percent in February, the biggest jumps in the country. Meanwhile, entire towns will go up in China with no inhabitants. These are China's notorious "ghost cities."

What the experts say: "There are obvious bubbles in the property market, and it is possible it will get out of control and crack," according to Wang Shi, chairman of China's largest developer.
 

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Warning stat: The "crypto currency" now trades at $63 -- double what it was at the beginning of March.

What the experts say: "In hindsight, the people who bid the price of Bitcoins up to $30 in 2011 may not have been so crazy after all. It just took the broader market, including me, a couple of years to catch up with them," according to Ars Technica's Timothy B. Lee.

Warning stat: Investors recently bid a record $3.16 for each dollar of the $2.011 trillion in bonds the U.S. government auctioned in 2012, Bloomberg says.

What the experts say: "Long-term interest rates are now unsustainably low, implying bubbles in the prices of bonds and other securities," warns economist Martin Feldstein. "When interest rates rise, as they surely will, the bubbles will burst, the prices of those securities will fall, and anyone holding them will be hurt."

PHOTO: Wikipedia

 

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Warning stat: Between December 2012 and February 20130 -- when Congress proposed a new assault weapons ban -- Colorado background checks soared 102 percent. Gun sales in Maryland between December and January totaled 68 percent of all the state's gun sales in 2010.

What the experts say: "We wouldn't see the demand increase if there weren't a ban, so we're getting a bubble that's caused by that demand increase due to the ban," according to Mac Clouse, Denver University finance professor.
 

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Warning stat: American farmland prices continue to grow at a blazing hot double-digit rate. An industry group recently forecast that values could surge 15 percent to 20 percent in 2013.

What the experts say: "It doesn't have all the hallmarks of a bubble," according to Robert Shiller. "One of them is most people have never heard of it. In my view of a bubble, it's something that gets people excited. Well, some people are excited, but most people don't even know about it."
 

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Warning stat: January home prices surged 23 percent in Phoenix and 17.5 percent in San Francisco, according to Case-Shiller.

What the experts say: "The real question in my mind is, 'Are we possibly off to the races again?'" asked economist Robert Shiller. "I think in cities like Phoenix and San Francisco, we might be seeing something pretty big developing. People there are very speculative-minded."
 

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Warning stat: Casino magnate Steve Wynn bought Picasso's "La Reve" in 1997 for $48 million. In March, he reportedly sold it to hedge fund manager Steve Cohen for $155 million.

What the experts say: "Art is in an insane bubble with many classic pieces going from $35 to $50 million and up," warned Dow Theorist Richard Russell.
 

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Warning stat: Gold has gone from around $1,000 per ounce in 2009 to around $1,600 today.

What the experts say: George Soros called gold the "ultimate asset bubble" in 2010 when it was priced at $1,275. We're obviously still above those levels.
 

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Warning stat: Health care spending has grown 2.5 times faster than incomes over the past 30 years.

What the experts say: "The health care system in the U.S. reminds us somewhat ominously of the bubble in housing finance, a 'public/private partnership,'" says Citi's Steve Wieting. "Housing consumption still receives strong tax preferences, as does health insurance (reflecting underlying health care consumption). Most aptly, prior to quasi-nationalization, housing GSEs earned private profits from public subsidies for housing, as do U.S. health care providers."
 

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Warning stat: Europe stabilized after ECB president Mario Draghi said, "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."

What the experts say: "To us the key word about the post summer 2012 Euro Area asset boom is that most of it is a bubble, and one which will burst at a time of its own choosing, even though we concede that ample liquidity can often keep bubbles afloat for a long time," warns Citi Chief Economist Willem Buiter.
 

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Warning stat: Prices are up 47 percent year-over-year, and are sitting at an 8.5 year high of $432 per 1,000 board fee.

What the experts say: "Signs of a housing bubble in the world's most populous nation may force the Chinese government to take measures to 'draw air' out of the rising housing market and to clamp down on construction lending, which would likely put a significant dent in the demand for building materials such as Lumber and Copper," according to Mike Zarembski, OptionsXpress.
 

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Warning stat: College tuition is up around 1,115 percent since 1978.
What the experts say: Jeff Gundlach notes that not only have wages not increased commensurate with tuition inflation, wages have actually been falling. "What have all these soaring tuition costs got you?" asked Gundlach rhetorically.
 

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Warning stat: Craft beer production surged 15 percent year-over-year in 2012.

What the experts say: Boston Beer Co. founder Jim Koch says most stores have reached their limit for carrying new breweries, and that too many breweries are making similar beers without adding anything to the market.
 

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Warning stat: Canadian home prices mirrored the U.S. housing rally. However, Canadian prices never fell. A recent Canadian Housing Affordability study says the country's home market is 10 percent overvalued.

What the experts say: "I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S," said Robert Shiller.
 

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Warning stat: The S&P 500 recently closed at an all-time high, up 135 percent from its March 2009 low.

What the experts say: "What we find is that Bernanke does not have nearly as great a track record on inflation as he thinks he has. Greenspan could not see that the housing market was an inflated bubble. Evidently Bernanke cannot see that the stock market is an inflated bubble."
 

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