VerySmartInvesting: Improved markets on strong earnings reports

Friday, January 21, 2011

Improved markets on strong earnings reports

Stocks were higher out of the gate, but have been losing ground since then. Dow is up 41, advancers over decliners 2-1 while NAZ was even. The story for the bank stocks is similar, the Financial Index started with a solid gain followed by selling.

S&P 500 FINANCIALS INDEX

Value	220.72
Change	0.88 (0.4%)

MLPs recovered lost ground in the last 2 days as the index rose 2+ to 364. The REIT index was up chump change in the 224s, after doing little for months. Junk bond funds were mixed to higher, again doing little in the last 3 months. Treasuries were a little higher, taking the yield on the 10 year Treasury bond down 1 basis point to 3.45%.

Treasury yields:

U.S. 3-month		0.15%
U.S. 2-year		0.62%
U.S. 10-year		3.45%

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index --- 2 weeks

Oil prices moved up closer to $90 a barrel as a weaker dollar helped counter concerns that China, the world's biggest energy consumer, will take more aggressive steps to slow its torrid economic growth. Gold futures extended 2 month lows as participants continued to shun the safety of the metal in favor of growth-sensitive commodities & stocks.

CLH11.NYM

...Crude Oil Mar 11

...89.39

...

0.20

(0.2%)

GCF11.CMX

...Gold Jan 11

.......1,339.20

...

7.30

(0.5%)

Gold Super Cycle Link!! Click Here

Photo: Yahoo

Bank of America (BAC, a Dow stock, reported a loss of $1.6B in Q4 after its costs related to soured home loans increased reflecting a clean-up effort in an endeavor to start 2011 with a clean slate. The deep slump in the real estate market has continued to hamper BAC more than its competitors because of its 2008 purchase of Countrywide Financial, the country's largest mortgage company at the time. "Last year was a necessary repair and rebuilding year," said CEO Brian Moynihan. The loss available to shareholders after paying out divs was 16¢ per share (below forecasts of 18¢). Excluding a charge of $2B related to the home loans, the bank would have earned 4¢. Last year BAC reported a loss of $5.2B after it repaid $4B related to its bailout during the financial crisis. Revenue for Q4 was $22.4B, down from $25.1B in the previous year. BAC also kept aside an additional $4.1B for bad home loans that it could be forced to buy back from Freddie Mac & Fannie Mae & other investors, & another $1.5B for litigation expenses. The results of the nation's largest consumer lender stand as a proxy for the health of the people's finances & BAC results echoed what other banks have been reporting earlier in the week, that the fiscal health of Americans is improving. For the 6th consecutive qtr, there were fewer people late meeting monthly payments. The bank's losses from lending in its credit card & home loan business declined $414M from Q3, because of a drop in delinquencies & bankruptcies. For the full year 2010, BAC reported a loss of $3.6B, compared to a loss of $2.2B in 2009. On these mushy results, the stock was down a nickel after drifting lower for almost 18 months.

BofA Reports Loss on Costs Tied to Bad Loans, Mortgage Unit

Bank of America --- 2 years

General Electric (GE), another Dow stock, Q4 profit rose more than 50%, to $4.5B from $3B last year as EPS climbed to 42¢ from 28¢. Revenue was $41.37B up from $41.05B. CEO Jeff Immelt attributed the improvement to stronger performance in the industrial & Capital segments. Highlights of the quarter included:
* 9% revenue growth in the Technology Infrastructure segment, to $10.96B.which posted a quarterly profit of $1.88B, up 11% from 2009.
* 12% revenue growth in the NBC Universal segment, to $4.76B which posted a quarterly profit of $830M, a 38% increase from 2009.
* 5% revenue growth for the Home & Business Solutions segment, to $2.33B (including GE Appliances & Lighting) which posted a quarterly profit of $139M, up 6% from 2009.
For the full year, GE posted a $12.2B in profits on $150B in revenue. That compares with net income of $11.03B on revenue of $155B in 2009. The stock rose $1 to the 19s, a high since last Apr.

GE posts 51 percent gain in 4Q profitat bizjournals.com

General Electric --- 2 years

Dow has been working its way higher in the last 2 weeks. YTD Dow is up almost 300, not bad but less that the bulls have been calling for after revising estimates upward last month. Google (GOOG), which powers my blog, reported results last night, but the stock is only up 1. Larry Page, a co-founder, has resumed command of the company causing concerns among investors. After a severe drop in the last 2 days, MLPs found buyers. But the chart above shows the performance of the index during earnings season & it has not been impressive despite good word & distribution increases.

Dow Jones Industrials --- 2 weeks