Dow dropped 118, advancers modestly ahead of decliners & NAZ inched up 2. The MLP index crawled up 1+ to the 258s & the REIT index gained 2+ to the 391s. Junk bond funds were mixed & Treasuries continued with limited buying. Oil was fractionally higher in the 72s & gold soared 31 to 2051 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Bank
of America (BAC) fell after the firm reported declining 4th-qtr earnings amid hefty one-time charges. EPS fell 35¢, in the 4th quarter, down more than 50% from 85¢ a year ago. It was hit by a pretax
charge of $1.6B in the qtr related to the transition away
from the London Interbank Offered Rate. The results also included
a special $2.1B fee charged by the Federal Deposit Insurance
Corp. The fee is tied to the failures of Silicon Valley Bank &
Signature Bank. Excluding items, EPS was 70¢, which outpaced expectations. However, revenue of
$22.1B fell short of estimates for the first time
in 2 years & was down 10% from the year-ago period. “We
reported solid fourth quarter and full-year results as all our
businesses achieved strong organic growth, with record client activity
and digital engagement,” CEO Brian Moynihan said. “Our
expense discipline allowed us to continue investing in growth
initiatives. Strong capital and liquidity levels position us well to
continue to deliver responsible growth in 2024.” The nation's 2nd-largest bank posted a $1.1B provision for credit losses,
up $12M from the same qtr last year. Net interest income decreased 5% to $13.9B
due to higher deposit costs & lower deposit balances, which more than
offset higher asset yields. The stock was up 23¢.
Citigroup (C) posted a $1.8B 4th-quarter loss after booking several
large charges tied to overseas risks, last year's regional banking
crisis & CEO Jane Fraser's corp overhaul. All told, the charges, so massive the bank preannounced
their effect this week, hit quarterly earnings by $4.7B ($2
per share). Excluding their effect, EPS would've
been 84¢ a share. Fraser called her company's performance “very disappointing” because
of the charges but said Citi had made “substantial progress”
simplifying the bank last year. The CEO announced plans for a
sweeping corp reorganization in Sep after previous efforts
failed to boost the bank's results & share price. Today, Citi said it expects to cut its headcount by 20K & post up to $1B in severance costs over the medium term. Citi previously said it would exit municipal bond & distressed debt trading operations as part of the
streamlining exercise. Earlier this week, the company said it booked bigger charges in the qtr than previously disclosed by CFO Mark Mason. Revenue slipped 3% to $17.4B in the qtr, though the bank
said revenue rose 2% after excluding the effect of divestitures &
charges tied to exposure to Argentina. Despite the noise, Citi's
institutional services operations, US personal banking & investment
banking performed well. The stock went up 58¢.
Citigroup posts $1.8 billion fourth-quarter loss after litany of charges
Wells Fargo (WFC) fell shares even after 4th-qtr profit rose from a year ago, as
the bank warned that net interest income for 2024 could come in
significantly lower year over year. “As we look forward, our
business performance remains sensitive to interest rates and the health
of the U.S. economy, but we are confident that the actions we are taking
will drive stronger returns over the cycle,” said CEO Charlie Scharf. “We are closely monitoring credit and while we see modest deterioration, it remains consistent with our expectations.” Scharf
said earnings in the latest period were helped by a strong economy &
higher interest rates as well as cost-cutting efforts put in place by
the bank. In the qtr ending Dec 31, 2023, EPS was 86¢, up slightly from 75¢ a year ago. Earnings were lowered by a $1.9B charge from a Federal Deposit Insurance Corp special
assessment tied to the failures of Silicon Valley Bank & Signature
Bank & a $969M charge from severance expenses. WFC
also recorded a $621M (17¢ per share) tax benefit. Excluding these items, EPS was $1.29, which was
better than predicted. Total revenue came in at
$20.5B for the period. That's a 2% increase from the 4th
qtr of 2022 when WFC posted $20.3B in revenue. The
company also topped earnings expectations, posting adjusted EPS of
$1.29 versus an estimate of $1.17. Net interest income fell 5% from a year ago to $12.8B & WFC warned that the figure could come in 7-9% lower for the
full year from $52.4B in 2023. The decline in net interest
income was due to lower deposit & loan balances, but offset slightly
by higher interest rates. Provisions for credit
losses rose 34% to $1.28B from $957B a year ago, as
allowances for credit losses rose for credit card & commercial real
estate loans. That was partially offset by lower
allowances for auto loans. The stock
Wells Fargo posts higher fourth-quarter profit, helped by higher rates
Gold closed with a gain on geopolitical concerns after the US & the UK launched airstrikes on Houthi militants in Yemen to quell attacks on Red Sea shipping, while a US inflation measure rose less than expected last month. Gold for Feb closed up $32 to settle at $2051 per ounce. The airstrikes followed on warnings to the Iran-backed militant group to end drone & missile attacks on ships in the Red Sea, which it said was to support Hamas in its war with Israel. A statement from the US Air Forces Central said the strikes were aimed at 60 targets in 16 locations in Yemen. While geopolitical worries support gold prices, inflation data from the US also contributed to the surge. The US reported its core Producer Price Index was unchanged last month from Nov, under expectations for a 0.2% rise. The reading supports expectations for US interest rate cuts even after yesterday's report of a higher than expected rise in consumer prices last month. The $ rose despite the weaker than expected PPI reading, with the ICE dollar index last seen up 0.1 points to 102.39. Treasury yields weakened, bullish for gold since it offers no interest. The 2-year note was last seen paying 4.174%, down 8.4 basis points, while the yield on the 10-year note was down 0.3 basis points to 3.968%.
Gold Closes Higher on Geopolitical Fears as the US and UK Carried out Airstrikes on Houthi Militants in Yemen
Oil rose after the US & its allies launched airstrikes against Houthi rebels in Yemen, retaliating for attacks on ships in the Red Sea that have imperiled flows of fuel & goods thru the vital waterway. Brent climbed 1.1% to settle above $78 a barrel, while West Texas Intermediate advanced to settle above $72 a barrel. Prices spiked even higher early in the session before paring gains alongside equities as investors gauged whether the escalation will spark a broader conflict in the Middle East. Pres Biden said that strikes had been conducted against a number of targets used by the Iran-backed group. The move had an immediate impact on shipping, with at least one major tanker owner saying it has paused voyages. In response, the Houthis said all US & UK interests are now legitimate targets. Earlier this week, Houthis had launched their largest assault to date on shipping in the Red Sea, prompting warnings of retaliation from the US. Iran also seized a tanker off the coast of Oman, further inflaming the situation. Tensions in the Middle East have been rising since Hamas's attack on Israel on Oct 7. The Houthis started attacking ships in mid-Nov, ostensibly in support of Hamas, & have said they won't back down until Israel ends its assault on Gaza. West Texas Intermediate for Feb gained 0.9% to settle at $72.68 a barrel & Brent for Mar settlement rose 1.1% to settle at $78.29 a barrel.
Oil Rises as Strikes Against Houthis Raise Middle East Risks
Earnings from the big banks were not impressive, especially after all the special charges. Next week, real corps will start & they should be interesting. Dow closed the week down 96 YTD. Meanwhile safe haven gold keeps flirting with its record highs near 2100.
Dow Jones Industrials
No comments:
Post a Comment