Dow plunged 534, decliners over advancers better than 4-1 & NAZ sank 294. The MLP index went up 1+ to the 199s & the REIT index dropped 4+ to the 478s. Junk bond funds inched higher & Treasuries saw heavy selling (more below). Oil jumped 1+ to 85 & gold added 3 to 1819.
AMJ (Alerian MLP index tracking fund)
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Goldman Sachs (GS), a Dow stock, profit fell in Q4, even as the deals market stayed strong. EPS declined 13% to $10.81. That fell short of the forecast for $11.77. Revenue grew 8% to
$12.6B which beat the forecast of just over $12B. The
bank continued to benefit from ebullient deal making.
Investment-banking revenue jumped 45% to $3.8B, with demand for
mergers & acquisitions still brisk. Trading revenue was $3.99B, down 7%, as pandemic-induced
volatility in capital markets subsided. Bond-trading revenue of $1.86B was essentially flat from a year earlier, while stock-trading revenue shrank 11%. While profits are still flowing from trading, GS is working to
increase its businesses that cater directly to consumers. Revenue from
its consumer & wealth management unit, which includes the Marcus
consumer bank & the team serving wealthy clients, rose 19% in Q4. Consumer-banking revenue grew 8% as consumers carried
higher credit-card balances. The bank's return on equity, a measure of how profitably it uses
shareholders’ money, was 23% in 2021 after a return of 11.1% in 2020. In
Jan2020, GS set a target return of at least 13% by 2023. The stock sank 30+ (8%).
If you would like to learn more about GS click on this link:
club.ino.com/trend/analysis/stock/GSa_aid=CD3289&a_bid=6ae5b6f
Goldman Sachs' profit declines by 13% in fourth quarter
The 10-year Treasury yield jumped to its highest point in 2 years, topping 1.85%. The yield on the benchmark 10-year Treasury note was trading around 6 basis points higher at 1.843%, coming off highs of over 1.85% seen earlier today. The yield on the 30-year Treasury bond climbed by 4.8 basis points to 2.163%. Meanwhile, the 2-year rate — which reflect short-term interest rate expectations — topped 1% for the first time in 2 years, hitting 1.0404%. Yields move inversely to prices & 1 basis point is equal to 0.01%. The move, which comes after a market holiday on Mon, indicates that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve. Last week, Fed Chair Jerome Powell told the Senate that he expected to see a series of interest rate hikes this year, along with a pullback in other pandemic economic support measures. Philadelphia Fed Pres Patrick Harker said last week that the central bank could raise rates 3 or 4 times this year. He noted that inflation is “more persistent than we thought a while ago.”
10-year Treasury yield trades around 1.83% after hitting 2-year high
Builders in the single-family housing market are facing growing expenses, which is causing a turnaround in sentiment to start the year. Builder confidence fell one point to 83 in Jan, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Anything above 50 is considered positive, but that is the first drop in 4 months. The index also stood at 83 in Jan 2021. “Higher material costs and lack of availability are adding weeks to typical single-family construction times,” said NAHB Chair Chuck Fowke. “NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2020.” The price of softwood lumber alone has jumped about 85% in just the last 3 months, & lumber prices spiked last spring & then came down dramatically over the summer. They are up again now, after the US doubled tariffs on Canadian lumber & Western wildfires disrupted lumber production. Prices for other materials, such as gypsum & steel, are also higher. And the ongoing labor shortage has pushed costs up as well. Of the index's 3 components, current sales conditions was unchanged at 90. Sales expectations in the next 6 months fell 2 points to 83 & buyer traffic fell 2 points to 69. Builders are also facing much higher mortgage rates in the new year, but the HMI data was collected early in the month & doesn't fully reflect that jump. The average rate on the 30-year fixed is now about 50 basis points higher than it was a month ago & 75 basis points higher than it was one year ago. “While lean existing home inventory and solid buyer demand are supporting the need for new construction, the combination of ongoing increases for building materials, worsening skilled labor shortages and higher mortgage rates point to declines for housing affordability in 2022,” said Robert Dietz, NAHB's chief economist.
Homebuilder confidence drops for the first time in four months, as inflation hits materials
Dow Jones Industrials
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