Wednesday, April 15, 2015

Markets rise as oil surges

Dow climbed 75, advancers over decliners 2-1 & NAZ advanced 33.  The MLP index rose 4+ to 445 & the REIT index was off 1+ to the 329s.  Junk bond funds were mixed to higher & Treasuries crawled higher.  Oil exploded with a 5% rise to 56 (near the highs for the year) & gold went above 1200 once again.

AMJ (Alerian MLP Index tracking fund)

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CLK15.NYM....Crude Oil May 15....56.43 Up ...3.14 (5.9%)

Live 24 hours gold chart [Kitco Inc.]

The US keeps pumping oil at a near-record pace, in spite of the collapse in prices over the past year & cutbacks in drilling.  Crude production rose 1.3% in Mar to the highest level since 1973, a Federal Reserve index showed.  Output was up 13.7% from a year ago, according to the central bank's report on industrial production.  For all of 2014, the gauge of oil extraction climbed 15.4%.

The pickup in output last month occurred even as producers put fewer wells in the ground.  Drilling plunged 17.7% in Mar from a month earlier & was down at an almost 70% annualized pace in Q1, the biggest decline in almost 6 years,  according to the Fed's seasonally adjusted figures.

Oil Production Jumps in March Even as U.S. Drilling Collapses

Bank of America posted a Q1 profit that beat estimates, as legal costs tumbled.  EPS was 27¢, compared with a loss of 5¢, a year earlier.  Adjusted EPS was 36¢, surpassing the 29¢ estimate.  CEO Brian T. Moynihan is seeking to boost revenue after spending the first 5 years of his tenure settling legal disputes, mostly tied to the 2008 acquisition of Countrywide Financial.  The firm’s litigation costs were $370M for Q1, compared with $6B a year earlier.  “At a time of continued low interest rates, we had good expense control as we focus on responsible growth with a balanced platform,” Moynihan said.  Last year’s legal costs were tied to mortgage disputes, triggering the 4th quarterly loss under Moynihan’s tenure.  The purchase of Countrywide left BAC responsible for thousands of bad home loans, contributing to more than $50B of expenses.  Noninterest expenses in Q1 plunged 29% to $15.7B, driven by the drop in legal costs.  Revenue declined 5.5% to $21.4B, partly because of a $757M reduction in equity investment income & $211M in adjustments to the firm’s debt holdings.  Excluding those items & accounting charges tied to debt, revenue dropped 1% to $21.9B.  Global markets, the bank’s trading operations, posted a 28% drop in profit to $945M on declines in fixed-income trading revenue.  The division’s revenue fell 7% to $4.6B.  Revenue in the fixed-income, currency & commodities sales & trading division decreased 7% to $2.75B on declines in credit & mortgages.  Foreign-exchange sales & trading revenue was the highest since the company acquired Merrill Lynch in 2009, doubling from the first qtr of last year, on increased volatility.  Consumer-banking profit was almost unchanged at $1.48B as lower expenses were offset by a decline in net interest income.  Profit at the wealth-management division, which includes the Merrill Lynch brokerage, declined 11% to $651M.  BAC, won conditional Federal Reserve approval last month to repurchase $4B in stock.  The lender must resubmit revenue & loss models & improve internal controls by Sep 30, the Fed said.  The firm is keeping its quarterly div unchanged, disappointing analysts who had expected an increase to 8¢ from 5¢.  The stock slid 18¢.  If you would like to learn more about BAC, click on this link:

BofA Results Disappoint Analysts as Cost Cuts Deemed Inadequate

Bank of America (BAC)

stock chart

Confidence among US homebuilders rose in Apr for the first time in 5 months as prospective buyers returned to the market & sales climbed.  The National Association of Home Builders/Wells Fargo sentiment gauge increased to 56, the highest since Jan, from a revised 52 in the previous month.  Readings above 50 mean more respondents said conditions were good.  The forecast called for the gauge to climb to 55.  Warmer weather is encouraging builders to start work on more homes at a time when tight inventory has been pushing up housing prices.  Sustained improvement in the job market & a long-awaited pickup in wage growth would help to further strengthen demand as the spring selling season begins.  Builder confidence increased in 3 of the 4 regions, with the biggest improvement coming from the Northeast.  Sentiment also rose in the West & reached a 5-month high in the South.  The group’s gauge of prospective buyer traffic increased to 41 from 37 last month, while the index of current single-family home sales rose to 61 from 58.  The measure of the sales outlook for the next 6 months climbed to a 4-month high of 64 in Apr from 59.  “This uptick shows builders are feeling optimistic that the housing market will continue to strengthen throughout 2015,” the association said.  A stronger pace of job growth that’s accompanied by fatter paychecks may help persuade more Americans to take the plunge.  “As the spring buying season gets under way, homebuilders are confident that current low interest rates and continued job growth will draw consumers to the market,” NAHB Chairman Tom Woods said.

Homebuilder Sentiment in U.S. Rose for First Time in Five Months

Stocks rose on what was believed to be improved earnings that weren't all that great.  Earnings forecasts have been revised lower so a beat is not as important as in other times.  Sluggish economic conditions around the globe continue along with political unrest.  Overseas business is nothing to write home about & the US economy just can not break out from 2%+ annual growth rate.  But Dow & NAZ are inches below setting new record highs as  if they didn't have a care in the world.

Dow Jones Industrials

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