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On Wednesday there was some good news for California, which has been one of the hardest hit states in the housing crisis, when a local realtor group said that sales there jumped 18% in May compared to May 2007.

But the hard times are far from over: Prices took a beating, plummeting 35% during the same period, according to a report from the California Association of Realtors (CAR).

"Home sales exceeded 400,000 (on an annualized, adjusted rate) last month for the first time since early 2007," said CAR President William E. Brown. "While this is a welcome sign for the market, it was due in part to the large share of distressed homes for sale in many parts of the state."

May was the second straight month of increased sales volume in California, but that followed a disastrous string of 30 consecutive months when sales saw a steady decline.

"What you’re seeing in some of the hardest hit markets, like California and Florida, is that Americans still love bargains," said Mick Larson, a real estate analyst for Weiss Research. "And when the price is right people will buy."

Not everyone is convinced that the time is right. Jonas Lee, a principle of New York-based Redbrick Partners, which buys distressed properties all over the country, says he’s watching California closely, but isn’t ready to jump into the fray just yet.

"We’ve been monitoring sellers of bulk REO (bank repossessed) properties and their prices have gotten more realistic," he said. "But we’re concerned whether this is the end of the decline. We don’t think so. And the decline curve may be bathtub shaped - it goes down and stays down for a long time."

The state-wide median price for a home sold during the month was $384,840, down from $594,530 last May payday loans in one hour. That severe drop probably reflects the fact that there are so many distressed sales and low-priced homes on the market, according to CAR.

"[It’s the result of] a large number of short sales and foreclosures in the market," said CAR Vice President and Chief Economist Leslie Appleton-Young.

The Santa Barbara County area has been particularly hard-hit by falling prices; the median home sold there in May for $400,000, 24% below April prices, and 55% below May 2007.

Monterey County, down 49% since last May, and the Riverside-San Bernardino area, off 35%, also suffered steep losses.

Los Angeles prices fell 21% from a year ago, while San Francisco prices dropped 20%, and San Diego was down 27%.

The increased sales volume helped reduce the inventory of homes on the market to 8.4 months at the present rate of sales. That’s down from the 10.7 months of inventory that was on the market a year ago.

Additionally, far fewer new homes are being built.

"Builders have aggressively slashed housing starts," said Weiss. "That is working inventory levels down."

Most industry analysts agree that the big inventory overhang will have to be whittled down substantially more before home prices can begin to recover.

California experienced some of the biggest run-up in prices during the bubble years, and the state has been hit hard in the slump.

Foreclosures have become a major problem. California recorded 72,000 foreclosure filings in May, the most of any state. Its rate of one filing for every 183 households trailed only Nevada. 

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Italian defense manufacturer Finmeccanica SpA’s (SIFI.MI: Quote, Profile, Research, Stock Buzz) recent $4 billion acquisition of U.S. defense company DRS Technologies Inc (DRS.N: Quote, Profile, Research, Stock Buzz) was a big one, but it is not the last one.

More European defense manufacturers looking to gain a presence in the U.S. defense market — the world’s largest — will likely be targeting U.S. defense suppliers.

Increasing acquisition activity is also expected within the domestic defense sector as suppliers consolidate to become one- stop shops for manufacturers such as Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz) and Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz).

U.S. defense spending — pegged at more than $500 billion for 2009, excluding more than $100 billion for the cost of war — is not expected to decrease in the next few years, regardless of who wins the presidential elections this year.

The pace of spending could rise or fall, but the overall budget is not expected to shrink.

“Four key factors underlie this assessment,” said Matthew Smith, a defense economics analyst at Jane’s Information Group.

“The cost of the military is rising, the political will to reduce spending is nonexistent, the security environment remains challenging and, despite current economic concern, the U.S paydayloans.com. can afford it.”

With the strength of the euro, this is an opportune time for European companies to make acquisitions in the United States and try to get a piece of the massive U.S. defense budget. 

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Kroger Co (KR.N: Quote, Profile, Research, Stock Buzz), the largest U.S. grocery chain, posted better-than-expected quarterly profit on Tuesday, helped by an emphasis on lower prices, gasoline discounts and other efforts to appeal to cash-strapped consumers.

The company also raised its sales forecast and the lower end of its earnings forecast for the full year, and its shares rose as much as 9.6 percent.

The company, which has also rolled out a $4-per-prescription generic drugs program and offered shoppers a bonus for cashing tax rebate checks at its stores, said its latest research shows its customers are most concerned about soaring food and gasoline costs.

Sales of Kroger’s store brands also increased in the quarter, a sign that consumers are looking for lower-priced products.

“We did see solid growth in Kroger corporate brand share in the first quarter,” said David Dillon, chief executive officer, during a conference call with analysts.

Kroger posted a fiscal first-quarter profit of $386.0 million, or 58 cents per share, up from $336.6 million, or 47 cents per share, a year earlier.

Identical-store sales — stores open for at least five full quarters and which have not been moved or expanded — were up 5.8 percent, excluding gasoline sales.

“Kroger has now put up 10 consecutive quarters of (identical-store sales increases) between 5 percent and 6 percent, amazing consistency,” said Goldman Sachs analyst John Heinbockel in a research note online cash advance. He also pointed out that the increases came without Kroger significantly increasing its store base. “Simply put, the company is chewing up meaningful market share.” 

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Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz) is not in talks for a sale of the firm nor is its Chief Executive Richard Fuld considering such a move, a person close to the company said on Wednesday.

Earlier, CNBC television cited Wall Street insiders as saying Fuld was weighing a sale.

Lehman declined to comment.

The fate of Lehman, the smallest of the major Wall Street investment banks, has been the subject of intense speculation in the past few weeks. Many analysts have speculated it could be a takeover candidate.

The fourth-largest U.S. investment bank posted its first quarterly loss as a public company on Monday, but Fuld said then that the company’s franchise and capital position were strong.

In response to a question on a conference call after Lehman announced its results, Fuld said: “I have said many times that I very much believe that, with this franchise’s strength and power, we can go it alone.”

But he added that if a potential buyer came forward, he had an obligation to take its offer to the board of directors.

Some experts have said stand-alone U.S quick payday loans. investment banks such as Lehman are likely going to have to find commercial bank partners in the long run to get access to a stable source of funds. That would help them deal with future shocks and to sustain growth even if regulators restrict leverage. 

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CHICAGO–UAL Corp.’s United Airlines yesterday became the latest airline to begin charging $15 (U.S.) to check a single bag on domestic flights, matching the controversial fee launched in May by AMR Corp.’s American Airlines, hoping to offset soaring fuel prices.

The parent of the Number 2 U.S. airline said it also raised the fee it charges to check three or more bags, overweight bags or items that require special handling to $125 from $100, or to $250 from $200, depending on the item.

The changes apply to customers who buy a ticket on or after June 13 for travel within the U.S. and to or from Canada, Puerto Rico and the U.S. Virgin Islands on or after Aug. 18. The $15 fee doesn’t apply to some United loyalty-plan clients.

Such fees are part of a broad effort by airlines to charge passengers for services once included in the price of a ticket credit reports. Some charge for in-flight meals, drinks and snacks.

United said fees for checking the first and second bags would generate about $275 million a year.

Also yesterday, US Airways Group Inc. announced sweeping cuts in service and hikes in fees to cover sky-high fuel costs. The carrier based in Tempe, Ariz., said it will cut domestic flights, shrink its fleet, slash 1,700 jobs, charge passengers $15 to check a first bag for tickets booked or after July 9, and add a $2 fee for non-alcoholic inflight drinks.

Reuters News Agency

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OTTAWA–A new study reports Canadian cinemas entertained more moviegoers and were much more profitable in 2006.

Statistics Canada says cinemas, including indoor theatres, drive-ins and film festivals, sold 102.9 million tickets in 2006, up 1.9 per cent from 101.0 million the year before.

The increase helped take the sting out of declines in 2004 and 2005.

The motion picture theatre industry recorded total operating revenues of about $1.2 billion, up 2.4 per cent from 2005, while reducing operating expenses.

As a result, operating profits totalled $111.5 million, a substantial increase from $21.6 million in 2005.

The industry posted an operating profit margin of 9.1 per cent in 2006 compared with 1.8 per cent in 2005.

Theatres in Ontario and Quebec accounted for about two-thirds of total national operating revenue.

Ontario theatres continued to dominate the country, accounting for 42 per cent of total operating revenues in 2006 how to get a free credit report. Quebec theatres represented 18 per cent, while those in Alberta and British Columbia each represented 14 per cent.

However, theatres in Western Canada were more profitable than their counterparts in Quebec and Ontario. Those in British Columbia, Alberta and Saskatchewan recorded operating profit margins above the national average.

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The Toronto stock market gave up ground for a second session today as energy and other commodity stocks backtracked during the afternoon after a strong start early in the day.

Support came from Canadian bank stocks and a strong earnings report from Bombardier Inc. (TSX: BBD.B).

New York markets had strengthened during the morning on lower oil prices and an economic report which showed the U.S. service sector is expanding but turned mixed during the afternoon on more concerns about the financial sector and inflation.

Toronto's S&P/TSX composite index declined 38.15 points to 14,690.46.

Bombardier Inc. shares continued to set six-year highs, gaining 74 cents to $8.90 after the aircraft and train maker reported a near-tripling of first-quarter profit to US$226 million as revenue increased 21 per cent from a year ago to $4.8 billion. Bombardier also resumed paying a dividend, after suspending payouts in April 2005.

The TSX Venture Exchange moved up 2.47 points to 2,642.57.

Two days of sharp price declines in the price of oil helped send the Canadian dollar down 0.95 cent at 98.2 cents US.

New York's Dow Jones industrial average fell 12.37 points to 12,390.48.

The Nasdaq composite index moved up 22.66 points to 2,503.14 while the S&P 500 slipped 0.45 of a point to 1,377.2 as the Institute for Supply Management said its service sector index was 51.7 in May, better than the 50.3 reading that had been expected. An index above 50 indicates the sector is growing.

Inflation worries also occupied investor attention after U.S. Federal Reserve chairman Ben Bernanke said inflation is “significantly higher" than the central bank would like and that price stability is a top priority of the Fed.

The Toronto market's energy sector dipped almost one per cent as oil prices further deteriorated after the U.S. Department of Energy said crude inventories fell by 4.8 million barrels last week. But there were signs of lower demand as gasoline inventories increased by 2.9 million barrels and distillate inventories rose 2.7 million barrels. The July crude contract on the New York Mercantile Exchange moved $2.01 lower to US$122.30 a barrel after losing US$3.45 Tuesday.

A stronger U.S. dollar and worries about lower demand have helped take the price of crude down from its high of just over US$135 on May 22 but analysts think this retracement is likely temporary.

John Stephenson, portfolio manager First Asset Funds, said he thinks it's just a short-term pullback but in the long term the price for energy, especially oil, will go higher.

"Certainly the equity marekts don't believe US$130 oil is sustainable because it's not pricing that in – but the truth of the matter is, I don't see what your're going to replace oil with," Stephenson said.

On the TSX, EnCana Corp pay day loans. (TSX: ECA) fell $1.15 to $89.25 and Talisman Energy (TSX: TLM) retreated 36 cents to $22.51.

The TSX financial sector was ahead 0.35 per cent as Scotiabank (TSX: BNS) rose 57 cents to $51.41.

Sentiment improved after Merrill Lynch analyst Guy Moszkowski said he doesn't believe Lehman Bros. faces the same kind of path as Bear Stearns, which nearly collapsed when customers fled on fears it didn't have enough free cash to stay in business.

Lehman stock tumbled more than 15 per cent Tuesday on reports the fourth-largest U.S. investment bank may raise capital from an outside investor and allay market fears of a liquidity crisis. Today, its shares rose 79 cents to US$31.40.

However, Moody Investor Services said that it is reviewing the AAA insurance financial strength ratings for bond insurers Ambac and MBIA. Moody's said the "most likely" outcome of the review will be a downgrade. Ambac stock plunged 51 cents or 17 per cent to US$2.49 while MBIA shares fell $1.06 or 15.84 per cent to US$5.63.

Tech stocks supported the Toronto index as Research In Motion Ltd. (TSX: RIM) advanced $1.84 to $136.44 and Nortel Networks (TSX: NT) ran ahead 25 cents to $8.26.

The base metals sector eased 1.2 per cent with Teck Cominco (TSX: TCK.B) down $1.18 to $48.35.

The August bullion contract on the Nymex was down $1.70 to US$883.80 an ounce and the TSX gold sector gave back 0.65 per cent. Barrick Gold (TSX: ABX) faded 50 cents to $39.66

Clothing retailer Reitmans (Canada) Ltd. (TSX: RET.A) said its first-quarter profit moved up slightly to $18.4 million. But its shares dropped $1.27 to $16.99 as sales were down one per cent to $228.3 million on a 4.8 per cent declline in same-store business blamed on bad weather.

Liquidation World Inc. (TSX: LQW), the money-losing operator of 106 "asset recovery" stores, disclosed that its board has formed a special committee "to investigate and evaluate strategic alternatives" – an indication the company is for sale. Its shares rose 31 cents to $1.87 on slim volume, down from the $5 level a year ago.

In U.S. deal-making, J.M. Smucker Co. has agreed to acquire the Folgers coffee brand from Procter & Gamble in a US$2.95-billion stock deal.

Traders also considered a report from the Organization for Economic Co-operation and Development projecting slower than previously expected growth this year and next in most of its 30 member countries. The OECD cut its outlook for growth in its member countries to 1.8 per cent this year, down from a previous forecast of 2.3 per cent.

On the TSX, declines beat advances 865 to 705 with 233 unchanged as 375 million shares traded worth $6.3 billion.

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VANCOUVER–Lululemon Athletica Inc. says its first-quarter profit more than doubled but warned its annual earnings will be lower than anticipated due to expansion spending, the retailer announced yesterday, sending its shares plunging.

The Vancouver-based yoga-wear retailer reported first-quarter profit of $8.5 million (U.S.), or 12 cents a share for the 13 weeks ended May 4, 2008, versus profit of $3.5 million, or 5 cents a share in the year-ago quarter. Revenues jumped to $78.2 million from $44.8 million the year earlier quarter.

Analysts surveyed by Thomson Financial were looking for earnings, reported in U.S. dollars, of 12 cents a share on quarterly revenue of about $71 million.

But the retailer also lowered its outlook for the balance of the year to between 68 and 71 cents a share down from previous guidance of 70 to 72 cents.

"This guidance continues to be based on anticipated comparable store sales growth of low teens; or high single digits on a constant dollar basis, and 35 planned new store openings in North America," Lululemon announced after markets closed yesterday.

As well as lowering its per-share projections, Lululemon raised its revenue guidance to between $380 million and $385 million from $370 million to $375 million, saying, "The lower earnings outlook is primarily a result of incremental hires and other strategic initiatives."

Lululemon shares were down more than 12 per cent in after-hours trading in New York, or $3.93 at $28.29 (U.S.) after the announcement payday advance lenders. Before the earnings release, its shares in Toronto closed up 56 cents to $32.65 (Canadian).

Christine Day, who takes on the CEO role officially at the end of June, after being wooed away from Starbucks in January, said the company plans "additional strategic investments."

Lululemon has 87 stores – 42 in Canada, 39 in the U.S., four in Australia and two in Japan. It plans to close its Japanese stores to focus on the U.S. market.

The Canadian Press

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