Friday, April 11, 2014

Markets pull back on disappointing JPMorgan earnings

Dow dropped 46, decliners over advancers 4-3 & NAZ was off 2.  The MLP index rose 2+ to the 473s & the REIT index slid a fraction to 285.  Junk bond funds were lower & Treasuries saw modest buying.  Oil & 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...103.32 Down ...0.08  (0.1%)

GCJ14.CMX....Gold Apr 14........1,319.70 Down ...0.40  (0.0%)

Consumer confidence rose in Apr to the highest level since Jul, boosted by further improvement in the labor market that will provide some traction for the economy after a weather-related slowdown early this year.  The Thomson Reuters/University of Michigan preliminary index of sentiment climbed to 82.6 from a 4-month low of 80 in Mar.  The estimate called for an increase to 81.  More favorable views of current conditions & the outlook show consumers are taking higher prices at grocery stores & gas stations in stride, indicating gains in household purchases will be sustained.  More employment opportunities that spur a pickup in wages would help provide a bigger boost for the consumer spending that makes up the largest part of the economy.  The Michigan survey’s index of expectations 6 months from now increased to 73.3, the highest since Aug, from 70 last month.  The gauge of current conditions, which measures respondents’ views of their finances, climbed to a 4-month high of 97.1 in Apr from 95.7.

Michigan U.S. Sentiment Index Increased to 82.6 in April From 80

JPMorgan Profit Falls 19%
Photo:   Bloomberg

JPMorgan, a Dow stock, Q1 profit fell 19% on lower revenue from fixed-income trading & mortgages, themes that may be repeated next week. EPS was $1.28, down from $1.59.  The estimate was for $1.46.  Revenue dropped 7.7% to $23.9B, as noninterest expenses declined 5.1% to $14.6B.  Earnings at the corp & investment bank dropped 24% to $1.98B, as revenue declined 15% from a year earlier to $8.6B.  Fixed-income trading revenue fell to $3.8B on “weaker performance across most products and lower levels of client activity.”  Net income from consumer & community banking fell 25% to $1.94B as provisions for credit losses surged 49% to $816M.  Revenue was $10.5B, down 10% from a year earlier.  Mortgage revenue dropped to $1.57B, from $2.72B a year earlier.  Home-loan originations were $17B, down 68% from the prior year as higher interest rates curtailed refinancings.  Profit in asset management declined 9% to $441M, as costs rose 11% to $2.1B on “headcount-related expenses.”  Assets under management climbed 11% to $1.6T amid greater inflows & rising equity markets.  Commercial banking posted a 3% profit decline to $578M.  JPM could eventually earn $27B a year as legal costs subside & higher interest rates boost margins, the bank said in Feb.  The company said the quarterly div will rise to 40¢ from 38¢ & JPM authorized a $6.5B stock buyback after the Fed approved the lender’s capital plan.  The stock lost 2.01 on the glum news.  If you would like to learn more about JPM, click on this link for Trend Analysis:

JPMorgan Profit Falls 19% on Trading, Mortgage Declines

J P Morgan (JPM)

US wholesale prices rose in Mar as the cost of services climbed by the most in 4 years while commodities stagnated.  The 0.5% advance in the producer-price index (PPI) was the biggest since Jun & followed a 0.1% decrease the prior month, according to the Labor Dept.  The recent inclusion of services may contribute to the gauge’s volatility from month-to-month, which will make it more difficult to determine underlying trends.  Rising prices at clothing & jewelry retailers & food wholesalers accounted for much of the jump in services, even as energy costs retreated, signaling slowing growth in emerging markets (such as China) will keep price pressures muted.  With inflation running well below the Federal Reserve’s goal, the central bank is likely to keep borrowing costs low in an effort to spur growth.  Today’s PPI report is the 3rd to use an expanded index that measures 75% of the economy, compared to about a 1/3 for the old metric, which tallied the costs of goods alone.  After its first major overhaul since 1978, PPI now measures prices received for services, gov purchases, exports & construction.  Core wholesale prices, which exclude volatile food and energy categories, climbed 0.6%, the biggest gain in 3 years, exceeding the projected 0.2% advance predicted.  They dropped 0.2% in Feb.  The year-to-year gain in producer prices was the biggest since Aug & followed a 0.9% increase in the 12 months to Feb.  Excluding food & energy, the index also increased 1.4% year to year following a 1.1% year-to-year gain in Feb.

Wholesale Prices in U.S. Rise More Than Forecast on Services

The earnings report from JPM was not encouraging & will probably be followed by more such reports.  The company has been bogged down with massive legal expenses & fines, but old fashion measures were weak highlighted by lower revenue.  In this era of low interest rates, investors have gotten used to weak revenue data.  But that metric may be getting more attention going forward.  Dow is down 330 in Apr as earnings season kicks into high gear.

Dow Jones Industrials

No comments: