KB Home (NYSE: KBH) shares dropped after the nation's largest homebuilder announced that its losses widened in the second quarter. Weaker sales and falling home prices led to a 55 percent drop in revenues as the company also booked charges related to the lower value of unsold homes, joint venture deals and land option contracts.

KB Home reported a net loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million during the same time a year ago. Meanwhile, revenues plunged to $639.1 million from $1.41 billion a year ago, driven down by lower housing and land sale revenues.

"Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home," Mezger said in a statement. "But as housing affordability continues to improve, we expect todays hesitant buyers to become a healthy source of demand for new homes, fueling the eventual housing market recovery."

The problem is so large at this point that some rental rates are higher than mortgage rates for like-kind properties! Still, people prefer to pay rent instead in order to avoid paying money on a property that is going to decline in value. This simply emotional fear has been causing a very real decline as inventories continue to rise.

Foreclosures have risen substantially over the past few months, and very few buyers are stepping in to purchase houses on the cheap. This environment of high supply and low demand has forced down prices for simple economic reasons. The problems won't be resolved either until buyers start to step in and purchase inventory.

When will buyers step in? That's the million dollar question for home buyers and companies like KB Home alike...

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Goldman Sachs (NYSE: GS) advised selling shares of the financial services firm Citigroup, which sent shares sharply lower on the day. Goldman cut its recommendation for US Brokers to neutral from attractive and strongly recommended that investors sell shares of Citigroup, citing multiple problems, including more asset write-downs, higher loss provisions for consumer credit and the potential for more capital raises, dividend cuts or asset sales.

Shares of Citigroup fell more than 6% on the news, reaching a brand new 52-week low. Goldman's recommendation marks a sharp reversal from the positive stance that it took following the near collapse of Bear Stearns. The news also comes just days after Goldman Sachs itself was downgraded to market perform by analysts at Wachovia "in light of renewed economic fears" despite being the strongest investment bank in the U.S.

Goldman Sachs cut its second quarter and fully year forecasts for several brokers. The largest cuts were made on Citigroup and Merrill Lynch where it now sees the firms posting losses in both the second quarter and full year. Goldman expects Citigroup to take a $9 billion writedown and Merrill to take a $4.2 billion writedown in the most recent quarter. Both firms are expected to report their second quarter earnings in mid-July.

In the end, the brokers and investment bankers are still in big trouble and face large future writedowns. Goldman Sachs remains one of the few large investment banks that has been faring well against the problems, but even they have seen a downgrade. It will be very interesting to see where things head from here now that the negative sentiment is now out in the open with even analysts beginning to downgrade the sector...

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MBIA Inc. (NYSE: MBI) shares are trading higher on the day in a continued recovery from its recent lows as some investors are beginning to find themselves bullish on the bond insurer. This sentiment is apparent in the price of the July $5 options, which are trading at a high $0.75 per contract. The price implies that some investors are betting that MBIA will rise above $5.75 during the next 23 days before the July options expiration.

Investors who are neutral to bullish may be interested in purchasing a covered call on MBIA to take advantage of this premium. The return on investment for this position would be approximately 15.31% for a 23-day period assuming that the stock doesn't plummet below $4.90 during that time.

Shares of MBIA have plummeted in recent weeks after an analyst from UBS noted that the company could face an additional $6.8 billion to $7.5 billion in losses on its mortgage-backed securities and structured finance portfolio. Brian Meredith noted that these calculations were based on UBS' mortgage research team's cumulative mortgage-securities and credit loss expectations.

Recently, MBIA's credit rating was cut to "AA" from "AAA", which means that the insurer may face difficulty generating new business. After all, who is going to insure their bonds with someone who has a less than perfect credit rating.

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Dow Chemical Company (NYSE: DOW) has raised its prices once again in an effort to counteract rising commodity prices. The move represents the second price hike this month alone while the company also noted that it would trim its capacity for several products and add on new freight surcharges to certain orders.

The move also underscores the problem the Federal Reserve faces as it modifies its interest rate policy to address the rising threat of inflation amid weak economic growth. The Fed has already aggressively cut rates from last September through April, but the result has been a dramatic decline in the value of the dollar.

Dow Chemical also noted that things weren't going to improve anytime soon. The company said it will raise prices as much as 25% starting on July 1st, which would come on top of the up to 20% increase that took effect June 1st and led several others to make similar price adjustments of their own.

The company made its first dramatic move back in December when it announced that it would cut 1,000 jobs and shut a number of underperforming plants in order to put the savings to work in higher-growth opportunities. It also unveiled a joint venture with Kuwait Petroleum, which allowed it to sell a big piece of its less profitable assets by selling a 50% stake for $9.5B.

It appears that for the next few months, consumer prices will continue to rise unless the Fed takes action.

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CME Group Inc. (NYSE: CME) announced plans today for a share buyback and special dividend that effectively sweetens its bid for Nymex Holdings Inc. (NYSE: NMX). The world's largest futures exachange said it would institute a $1.1 billion buyback plan over the next 18 months and pay a $5 per share cash dividend if its bid for the energy and metals exchange succeeds.

The proposed acquisition hit some snags due to a slump in CME Group's share price, which has lowered the takeover price by as much as $3 billion to just $8 billion. The buyback and dividend tactic worked wonders the last time CME Group used it during its acquisition of rival Chicago Board of Trade last year. After all, they are great for shareholders!

The original deal calls for Nymex shareholders to receive $36 and 0.1323 shares of CME for each NMX share. The proposed dividend would raise the purchase price for Nymex stock to $97.11 per share, which represents a $9.27 billion overall valuation. However, some investors are still concerned that the deal may fall through.

Many believe that the CME Group may be forced to tweak the cash portion of the deal slightly higher in order to sway the remaining opposition. This is the cause behind the recent rally in the differential between Nymex and CME Group shares that arbitrageurs have been trading for some time now.

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Winnebago Industries, Inc. (NYSE: WGO) shares fell sharply today after the recreational vehicle maker announced disappointing earnings. The company saw its third quarter profit dive 73% as higher gas prices, tigher consumer credit, and a softer economy drove motor home sales into the ground.

"The motor home market has changed significantly in the past year, with dramatic declines in the past few months," CEO Bob Olson said in a statement. "Discretionary purchases have declined in the United States as the country is faced with unstable fuel prices, consumer confidence at 16-year lows and a tighter credit environment."

Olson also noted that the industry has seen a decrease in motor home sale sof more than 26% for the first four months of this year and a stead decline of more than 30% in both March and April, which are typically stronger months for recreational vehicles. To help combat the declines, the company plane on closing its Charles City factor and restructure itself.

Many investors should have seen this coming with gas prices skyrocketing higher and recreational spending in general on the decline. However, shares in the company still dropped sharply by 5.69%. The stock is already down some 30% so far this year as many expect things to get far worse before they get any better.

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Huntsman Corporation (NYSE: HUN) shares fell sharply today after Hexion Specialty Chemicals said it may not follow through with its promise to purchase the company. Hexion decided not to pursue the purchase amid Huntsman's deteriorating financial condition that has many investors worried. At least one analyst has reduced his target from $28 to $15 per share amid the crisis that has sent shares plummeting.

The move to cancel the merger comes after Huntsman posted an 84 percent drop in first-quarter profits as it saw raw material and feedstock costs soar to record highs as the U.S. dollar weakened further. Sharp increase in raw material costs have been hitting many companies hard that have not hedged their bets. So far this year, Huntsman shares have slipped some 19 percent and they dropped a further 38 percent during today's trading.

Huntsman President and Chief Executive Peter Huntsman said his company would "vigorously enforce" its rights under the original deal and "seek to consummate the merger on the agreed terms". Analysts do not expected a renegotiated deal price at this time, and expect prolonged litigation to add to the uncertainty of the stock. As a result, Huntsman's shares fell sharply on the day.

Huntsman Corporation shares are trading down $8.12, or 38.93%, to $12.74 on the news.

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Goldman Sachs (NYSE: GS) has managed to surprise investors and avoid the credit crisis once more. The Wall Street powerhouse managed to book $2.1 billion in profit, which topped forecasts and sent shares higher. A sharp decline in leveraged loan activity was offset by a surge in equity underwriting as more companies looked to raise money during the quarter. Asset management and securities services also helped to make a spectacular quarter.

The investment bank noted that its net earnings for the second quarter came in at $4.58 per share, which was loser than the $4.93 per share a year ago, but higher than Wall Street's $3.42 per share estimate. Goldman Sachs also reported revenues that were 7.5% lower to $9.42 billion, but that also topped analyst estimates of $8.74 billion. Shares were already some 10% higher on the week but mobed up marginally on the news.

The impressive results came at the heels of a huge los at rival Lehman Brothers (NYSE: LEH) and at a tough time for investment banks in general. Lehman announced a $2.8 billion second-quarter loss while its management tried to calm investors concerned about a Bear Stearns style collapse on the horizon. Meanwhile, Morgan Stanley is expected to see its profit plunge some 60% from a year earlier.

In the end, Goldman Sachs continues to impress analysts and beat other competitors in the investment banking arena. This should also give them an edge in the future as they are able to attract and retain some of the best personnel in the industry thanks to the steep cuts elsewhere. It will be interesting to see where all of these banks are left when the market eventually recovers and they are looking to hire once again...

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