Monday, April 28, 2014

Markets rise on improved housing data

Dow jumped 112, advancers over decliners almost 3-2 & NAZ rose 12.  The MLP index fell fractionally to the 477s & the REIT index was up 1+ to the 291s.  Junk bond funds were mixed & Treasuries pulled back.  Oil inched higher while gold sold off.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM14.NYM...Crude Oil Jun 14...100.95 Up ...0.35 (0.4%)

GCJ14.CMX.....Gold Apr 14......1,293.60 Down ...7.10  (0.6%)

Contracts to purchase previously owned US homes climbed in Mar by the most in almost 3 years, showing residential real estate was starting to stabilize entering the spring selling season.  The pending home sales index rose 3.4%, the most since May 2011 & the first gain in 9 months, after a 0.5% drop in Feb (smaller than initially reported, the National Association of Realtors).  The projection called for a 1% increase.  But the gauge is 7.4% below a year earlier.  Housing demand has weakened since the middle of last year as rising prices.  Purchase contracts fell from the year prior after a 10% decrease in the 12 months that ended in Feb on an unadjusted basis.  Existing-home sales are projected to total just over 4.9M this year, less than the 5.1M in 2013.  The pending sales index was 97.4.  A reading of 100 is equal to the average level of contract activity in 2001, according to the Realtors group.

Pending Sales of U.S. Existing Homes Rise Most Since 2011

U.S. Said to Target Seven Russians, 17 Companies in New Actions
Photo:   Bloomberg

The Obama administration will sanction 7 Russians & 17 companies, including some involved in the financial, energy & infrastructure sectors.  The pres said today that the US is “moving forward with an expanded list of individuals and companies that will be affected by sanctions.  They will remain targeted. It will also focus on some areas of high-tech defense exports to Russia.”  EU representatives have discussed similar penalties.  The announcements of expanded measures came as the mayor of Ukraine’s 2nd-largest city Kharkiv, was shot in the back & rushed to hospital for surgery.  It also followed the seizure of intl military inspectors by pro-Russian separatists last week.  Russia has started military exercises on Ukraine’s border where NATO says Putin is massing  40K troops in a potential preparation for invasion.  That conflicts with an Apr 17 agreement aimed at solving the standoff, according to US & EU officials.  “Later today, there will be an announcement made, and I can tell you that it builds on the sanctions that are already in place,” Obama said.  “We are going to be moving forward with an expanded list of individuals and companies that will be affected by sanctions. They will remain targeted. It will also focus on some areas of high-tech defense exports to Russia.”

U.S. Said to Sanction Seven Russians, 17 Companies

Bank of America suspended a div increase & $4B of planned share repurchases because of an error in its stress-test submission to the Federal Reserve (FED).  BAC will resubmit its proposal after saying it incorrectly adjusted for cumulative realized losses on structured notes issued by Merrill Lynch.  CEO Brian Moynihan had planned on boosting the quarterly payout to 5¢ from a penny, 5 years after the firm cut the div to a token amount during the financial crisis.  Its revised proposal will probably feature lower payouts than in its original plan.  The bank’s estimated Tier 1 capital ratio is actually 11.9% as of Mar 31, which is 21 basis points below what the company previously reported.  The Tier 1 leverage ratio was 7.4%, or 12 basis points lower.  BAC discovered the mistake last week as it prepared its 10-Q quarterly regulatory filing & immediately notified the FED.  The error had gone undetected since the firm’s acquisition of Merrill Lynch in 2009.  The bank has been working for years to resolve headaches inherited with the purchases under his predecessor of Merrill Lynch & mortgage-lender Countrywide Financial during the financial crisis.  The company this month reported a $276M deficit for Q1, its 4th quarterly loss under Moynihan.  Today’s retreat is another setback for the CEO, who has underestimated the costs tied to mortgages as he sought to return capital to shareholders.  In Mar of 2011, the company said the FED objected to its plan to raise its div.  Months earlier, Moynihan told investors, “I don’t see anything that would stop us” from raising the payout in 2011.  The stock sank 68¢.  If you would like to learn more about BAC, click on this link for Trend Analysis:

BofA Halts Buyback, Dividend Increase After Finding Error in Capital Plan

Bank of America (BAC)

Stocks are having another good day.  The housing data was a good sign for an industry that not been performing well this year.  There is also merger activity, something the bulls like the see.  But Russia is on the move & nobody knows what Putin will do next.  Even with today's advance, Dow is in the red YTD.

Dow Jones Industrials

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