Monday, April 14, 2014

Markets advance on March retail sales

Dow rose 100, advancers ahead of decliners better than 3-1 & NAZ recovered 40.  The MLP index jumped an amaziing 5+ to 582 for a new record & the REIT index went up 1+ to the 284s.  Junk bond funds slid back & Treasuries were even.  Oil was flattish & gold went higher.

AMJ (Alerian MLP Index tracking fund)

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CLK14.NYM...Crude Oil May 14...103.57 Down ....0.17  (0.2%)

GCJ14.CMX....Gold Apr 14........1,326.00 Up .....7.30 (0.6%)

Retail Sales
Photo:   Bloomberg

American retailers warmed up in Mar as sales jumped a greater-than-forecast 1.1%, the biggest gain since Sep 2012, following a 0.7% advance in Feb that was more than twice as large as previously reported, according to the Commerce Dept.  10 of 13 categories, from auto dealers to furniture & clothing stores, showed a pickup.  More seasonable temps unleashed demand among customers who had been unable to dig out from snow storms that hurt the world’s largest economy at the start of Q1.  The surge in sales indciates consumer spending will propel a marked rebound in Q2 growth.  The figures used to calculate GDP, which exclude categories such as auto dealers & gasoline stations among others, showed a 0.8% increase, the biggest since Jan 2013, after a 0.4% advance in Feb.  While the gain may not be enough to lift Q1 growth, it provides a launching point for Q2.  Sales excluding declining receipts at gas stations, retail sales jumped 1.4%, the most since Mar 2010.  The jump was led by the biggest gain in motor vehicle purchases since Sep 2012.  Sales at department & general merchandise stores jumped the most since Mar 2007.  Sales at automobile dealers climbed 3.1% after rising 2.5% in Feb.  As the weather warmed in Mar, auto dealerships became busier as consumers also took advantage of generous incentives.  Cars & light trucks sold in Mar at a 16.3M annualized rate, the fastest since May 2007, following a 15.3M pace the prior month.   A 0.7% gain in retail sales excluding autos was the biggest in more than a year after a 0.3% increase in Feb.  The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores & service stations rose 0.8% in Mar after rising 0.4% the prior month.

Retail Sales in U.S. Increased in March by Most Since 2012

Citigroup reported an unexpected profit increase & beat estimates as the company recouped funds previously set aside for bad loans & cut losses at a division holding unwanted assets.  Q1 EPS was $1.23, the same as last year.  But excluding accounting charges & a tax item, EPS was $1.30, topping the $1.14 forecast.  CEO Michael Corbat is getting help from an improving global economy that’s making it easier for consumers & businesses to repay loans.  Citi released $673M in loan-loss reserves set aside in earlier years, exceeding the $500M other major banks.  Profit was also boosted by improving results in a portfolio of unwanted assets the bank has marked for sale.  Losses in the Citi Holdings unit narrowed to $284M from $804M a year earlier, as mortgage results improved.  Revenue at the division rose 61% from a year earlier to $1.46M.  Corbat was dealt a setback to his turnaround plan last month when Citi failed an annual stress test administered by the Federal Reserve, which cited deficiencies in the bank’s ability to project revenue and losses in its global operations.  Regulators rejected the firm’s request to quintuple its div & repurchase $6.4B of shares.  “Despite a quarter that was difficult for our company, we delivered strong results,” Corbat said.  “Both our consumer and institutional businesses performed well and we grew both loans and deposits while holding the line on our expenses.”  CFO John Gerspach said a month ago that capital-markets revenue would drop by a “high mid-teens” percentage.  Adjusted for accounting items, revenue from the markets & securities services division, which includes equity & bond trading, fell 12% to $5.18B.  Bond trading, which marred the company’s 2 prior quarterly earnings results, fell 18% to an adjusted $3.85B.  Equity trading rose 13% to $883M.  The stock rose 1.64.  If you would like to learn more about Citi, click on this link for Trend Analysis:

Citi Profit Tops Estimates as Bank Taps Loan-Loss Funds

Citigroup (C)

The patience of Mario Draghi with the € has snapped.  “The strengthening of the exchange rate requires further monetary stimulus,” The ECB told said on Sat.  “That’s an important dimension for our price stability.”  The warning, which prompted the biggest drop in the single currency in 3 weeks, marked the strongest stance yet taken since he & fellow policy makers began complaining in early Mar about the €’s rise.  With inflation at about a quarter of the ECB’s goal, the currency’s almost 6% gain against the dollar in the past year is further jeopardizing price stability by cheapening imports & hurting exporters.  The elevated rhetoric, echoed by other ECB officials, was a theme of weekend meetings of the  IMF & World Bank that global policy makers used to urge European officials to address lackluster inflation before it turns into Japanese-style deflation.   “More needs to be done to support growth and guard against further disinflation in the euro area,” US Treasury Secretary Jacob Lew said on Fri, adding he was “concerned by inflation rates consistently below target and weak demand.”  The strong euro is “a serious preoccupation,” Bank of France Governor Christian Noyer said, adding that the “overshooting of the exchange rate should correct itself.”

Draghi’s Patience Snaps on Euro as ECB Threatens Response

Stocks are having a good day as retail sales data were impressive.  Citi's results were well received, but much of the improvement in earnings was do to a release of reserves from the past & tax adjustments, not recurring items.  Then there's the strong € which has the potential to crimp the recovery in Europe.  After a bad week, markets are entitled to bargain hunting, but the rest of the global economy is stumbling more than in the US.  More earnings reports are coming this week.

Dow Jones Industrials

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