Wednesday, April 13, 2011

Markets rise on higher retail sales

Dow was up 38, advancers ahead of decliners 2-1 & NAZ gained 21.  The Financial Index slid a fraction after JPMorgan (JPM) reported mediocre earnings (see below):


Value 220.06 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -0.66   (-0.3%)

After yesterday's fall, MLPs are rebounding.  The index was up 3 to the 379s, taking its yield back below 6%.  But the REIT index was flat, junk bond funds inched higher & Treasuries were a little weaker.  The yield on the 10 year Treasury bond was up 2 basis points to 3.52%, near where it's been this month.  Oil pared gains, rebounding from the losses in the last 2 days, after a gov report showed a bigger-than-forecast increase in inventories. Gold is up $10 from its lows yesterday.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLK11.NYM...Crude Oil May 11...106.66 ...Up 0.41  (0.4%)

GCJ11.CMX....Gold Apr 11.........1,460.30 ....Up 7.40  (0.5%)

U.S. Retail Sales

Photo:   Bloomberg

Consumers spent more in Mar on furniture, electronics & at restaurants, but also paid more for gas.  Retail sales increased 0.4% last month according to the Commerce Dept, the 9th consecutive monthly gain.  However the increase shrank to a 0.1% when sales at gas were excluded. In addition, the biggest decline in auto sales in more than a year also pulled down overall sales. When taking out sales at gas station & of autos, retail sales rose 0.6%.  Some consider this a solid gain, given the jump in gas prices & the Easter shopping season is coming later this year. Sales in the previous 2 months were revised upward to show slightly better gains.  Auto sales dropped a sharp 1.7% in Mar, the biggest decline in over a year. However, some of the weakness was because General Motors (GM) scaled back incentive offers.  Shoppers spent 3.6% more at furniture stores & sales also rose at appliance stores & specialty clothing stores. Sales at general merchandise stores, the category that includes big retailers such as Wal-Mart (WMT), rose 0.4%.

Retail Sales in U.S. Rose in March for Ninth Straight Month

JPMorgan Chase to Buy Back Up to $15 Billion in Shares

Photo:   Bloomberg

JPMorgan Chase (JPM), a Dow stock, reported a 67% jump in Q1 earnings on solid growth in investment banking fees & a drop in losses in its credit card portfolio.  EPS was $1.28, up from 74¢ & beat estimates of $1.15.  But revenue fell to $25.2B from $27.7B last year.  The slump in real estate continued to weigh heavily on results as the provision for mortgage-related losses were increased $1.1B.  CEO Jamie Dimon said that the bank's mortgage losses were "extraordinarily high," adding: "Unfortunately, these losses will continue for a while."  Profits included $2B from reducing its credit card loan reserves as delinquency fell among the bank's credit card customers, allowing lowered estimates of future losses.  Investment banking revenue slipped to $8.2B from $8.3B last year.  However, much of the profits were generated from a 23% increase in investment banking fees to $1.8B, including record debt underwriting fees of $971M (up 33% from the prior year & a 41% increase in advisory fees to $429M).  The portion of customers who were late by 30 days on mortgage payments fell to 6.2%, compared with 7.3% a year earlier. However, its home equity loan portfolio had losses of $720M, while its sub-prime mortgage losses were $186M.  In Q1, JPM lost $1.1B from increased costs to service mortgages, an expense of $650M due to costs from foreclosures & mortgage repurchase losses of $420M.  The stock fell 21¢ on what is viewed as a mediocre report which will probably be repeated at other big banks. 

JPMorgan Profit Up 67% on Lower Credit Costs, Tops Estimate

J P Morgan Chase & Co (JPM)

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The JPM report was disappointing in a mild way.  But all banks will be suffering from comparisons with fairly strong results last year, hard to top those results.  MLPs are looking better after selling off yesterday, the index is just 4 below its highs set last week.  The pres gives a speech tonight outlining his broad vision on gov deficits.  Among other things, he will talk about raising taxes on the "rich" which probably will not go over well in the stock markets.  Early signals are that earnings season will get only a lukewarm reception at best.  Meanwhile, gas prices at the pump keep heading north which will serve as a drag on the recovery.

Dow Industrials (INDU)

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