Wednesday, April 16, 2014

Higher markets on industrial production data

Dow advanced 91, advancers over decliners 3-1 & NAZ gained 21.  The MLP index went up 1+ to the 478s & the REIT index was fractionally higher in the 288s.  Junk bond funds rose & Treasuries saw selling.  Oil keeps rising (to a 6 week high) & gold did little.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLK14.NYM...Crude Oil May 14...104.69Up ....0.94 (0.9%)

GCJ14.CMX....Gold Apr 14.........1,302.30 Up ...2.30 (0.2%)

In Mar industrial production rose more than forecast after a Feb gain that was twice as big as previously estimated, indicating factories recovered after a weather-depressed start to the year.  Output at factories, mines & utilities climbed 0.7% after a revised 1.2% increase the prior month, according to the Federal Reserve.  The forecast called for a 0.5% rise.  Manufacturing (75% of total production) grew 0.5% after surging 1.4%.  The figures follow recent data showing stronger retail sales & increasing employment that indicate the economy was gaining momentum as temperatures warmed.  A pickup in corp investment & further improvement in overseas markets would complement demand for motor vehicles & provide an additional boost for US producers.  Strength in manufacturing is helping make up for a struggling housing industry.  Utility output rose 1% after a 0.3% drop the previous month.  Mining production, which includes oil drilling, increased 1.5% last month.  Business-equipment production advanced 0.5% after a 2% surge in Feb.  Output of construction materials rose 0.2% after rising 1%.  Production of computers & electronic products also increased.  Consumer goods production rose 0.7%, led by appliances, furniture & carpeting.  Output of motor vehicles & parts decreased 0.8% after soaring 6.9%.  Excluding autos & parts, industrial production increased 0.8% last month after a 0.9% gain.

Industrial Production in U.S. Increases More Than Forecast

The pace of US home construction rebounded less than forecast in Mar, held back by declines in warmer parts of the country that indicate the recovery in residential building will be slow to develop.  Housing starts climbed 2.8% to a 946K annualized rate following a 920K pace in Feb (higher than previously reported), according to the Commerce Dept.  The estimate called for an increase to 970K.  Permits for future projects also declined.  While warm weather & the onset of the spring selling season boosted housing activity in the Northeast & Midwest, the industry’s recovery has been challenged by higher interest rates, slow wage growth & tight credit, which have put homeownership out of reach for some would-be buyers.  Bigger gains in employment are necessary to overcome declining affordability.  Building permits declined 2.4% to a 990K annualized pace, a sign that construction still has room to expand this month.   They were projected to be little changed at 1.01M.  Work on single-family properties climbed 6% to a 635K rate in Mar from 599K in the prior month.  Construction of multifamily projects such as condominiums & apartment buildings fell 3.1% to an annual rate of 311K.

Builders in U.S. Begin Work on Fewer Homes Than Forecast

Bank of America Chief Executive Officer Brian T. Moynihan

Photo:   Bloomberg

Bank of America swung to a surprise loss as the company booked $6B of costs tied to mortgage disputes.  Q1 EPS loss was 5¢, compared with a profit of 10¢ a year earlier.  But adjusted EPS was 35¢, beating the 27¢ estimate.  Its the 4th quarterly deficit since CEO Brian Moynihan took 4 years ago.  The 2008 purchase of Countrywide Financial left BAC responsible for thousands of bad home loans, contributing to more than $50B of expenses that included an accord covering bonds sold to Fannie Mae & Freddie Mac.  “The cost of resolving more of our mortgage issues hurt our earnings this quarter,” Moynihan said.  “But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders.”  Companywide revenue dropped 2.7% to $22.6B.  The $6B in legal costs included $3.6B tied to the settlement disclosed last month & a $2.4B increase in reserves for “previously disclosed legacy mortgage-related matters,” the lender said.  Last month, the bank said it may have to pay penalties tied to probes from gov entities including the Justice Dept & state attorneys general & that it faces civil lawsuits from the DOJ regarding its sales of mortgage bonds.  Excluded from the additional $2.4B in legal costs is a settlement with bond insurer Financial Guaranty Insurance.  The $950M deal, disclosed today, used money which the firm has previously set aside.  The stock fell 57¢.  If you would like to learn more about BAC, click on this link for Trend Analysis:

BofA Posts Loss on $6 Billion of Costs Tied to Mortgages

Bank of America (BAC)

Dow Jones Industrials

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