Thursday, January 15, 2015

Markets drift lower on bank earnings

Dow lost 33, decliners over advancers 4-3 & NAZ fell 24.  The MLP index went up 1+ to the 423s (still down 130+ from its record last year) & the REIT index was fractionally higher in the 246s.  Junk bond funds fluctuated & Treasuries advanced.  Oil drifted lower but gold had a good gain.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...48.65 Up .....0.17 (0.4%)

GCF15.CMX...Gold Jan 15.......1,258.00 Up ...23.60 (1.9%)

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More Americans unexpectedly filed applications for unemployment benefits last week, indicating companies let go of seasonal workers following the holidays.  Jobless claims climbed by 19K to 316K, the most since early Sep, from a revised 297K in the prior week, according to the Labor Dept.  The forecast called for 290K.  The first full week of the year is typically a time when holiday workers are dismissed & the increase in claims is a sign layoffs were higher than usual this year . The swings also make it difficult to adjust the data, which means it will take a few weeks to determine if the number of applications has truly picked up.  The 4-week moving average, a less volatile measure than the weekly figures, rose to 298K from 291K.  The number continuing to receive jobless benefits dropped 51K to 2.42M.  The unemployment rate among people eligible for benefits declined to 1.8% from 1.9%.

Jobless Claims in U.S. Unexpectedly Climb to Four-Month High

The German economy grew at the fastest pace in 3 years in 2014 & posted a 3rd consecutive fiscal surplus as it overcame a mid-year stagnation.  GDP rose 1.5%, compared with a 0.1% gain in 2013, the Federal Statistics Office said, matching the estimate.  The economy expanded about ¼% in Q4.  At €11.9B ($13.9B), the gov’s budget surplus was 0.4% of GDP, the 2nd-highest since German reunification in 1990.  Germany, Europe’s largest economy, is relying on domestic demand bolstered by record low unempolyment to fuel a recovery after it flirted with recession in the middle of the year.  The gov has insisted on keeping its budget close to balance even as other countries in the euro area call for more fiscal stimulus.  Exports climbed 3.7% last year & imports rose 3.3%.  Private consumption gained 1.1% & gov spending increased 1%.  Equipment investment advanced 3.7% & construction investment rose 3.4%, after both declined in 2013.  “The German economy turned out to be strong in a difficult global economic environment, benefiting especially from a strong domestic demand,” the statistics office said.  GDP increased just 0.1% in Q3 as investment declined, & the economy shrank 0.1% in Q2.  That partly reflects the impact on thousands of companies of EU sanctions of imposed on Russia.  Since then, surveys have shown a mixed picture for Germany’s economic health.  While a measure of manufacturing & services activity unexpectedly rose in Dec for the first time in 3 months, the rate of expansion remained sluggish.  Gauges of business &investor confidence have rallied.

German Economy Grows Fastest Since 2011 With Budget in Surplus

Bank of America Q4 profit fell 11% as revenue from fixed-income trading declined.  EPS slipped to 25¢ from 29¢ year earlier.  Excluding the impact of accounting adjustments & other one-time items, EPS was 32¢, beating the 31¢ estimate.  CEO Brian T Moynihan said last month that declines in trading revenue & low interest rates hurt Q4 results.  It was the lender’s 2nd profitable qtr of the year as costs from mortgage disputes & investigations into foreign-exchange manipulation weighed on results.  Revenue slipped 8.6% to $20.2B from a year earlier, excluding the impact of accounting charges.  The estimate was for $21B.  Revenue from fixed-income trading in the division fell 21% to $1.5B on weakness in credit & mortgage trading.  That helped fuel a $400M decline to $2.4B in the division’s trading revenue, excluding the impact of accounting charges & recoveries on legacy positions a year earlier.  Fixed-income trading revenue fell short of estimates of $1.83B.  In Nov, legal costs tied to defective mortgages are largely behind the firm, Moynihan said in Oct.  The company has agreed to more than $70B in settlements to resolve disputes after the financial crisis, mostly from the 2008 acquisition of subprime lender Countrywide Financial.  The stock fell 47¢.  If you would like to learn more about BAC, click on this link:

BofA Quarterly Profit Drops 11% as Fixed-Income Trading Revenue Declines

Bank of America (BAC)

Stocks are still on defense.  The early portion of earnings season brings earnings from the big banks & they have not been encouraging.  While Germany is adjusting to trade restrictions against Russia, other prominent countries like China & Japan are trying to stimulate their economies.  Dow is down more than 400 in just ½ a month.

Dow Jones Industrials

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