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Banks Flunk

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DOW + 187 = 17,908
SPX + 20 = 2082
NAS + 75 = 4947
10 Y – .02 = 1.76%
OIL – .41 = 41.76
GOLD – 13.30 = 1243.40

Retail sales dropped a seasonally adjusted 0.3% last month, the second decline in 3 months. The weak pace of retail sales from January through March is likely to contribute to another soft quarter of U.S. growth when the government reports gross domestic product later this month. Sales at U.S. retailers were expected to spring back in March due in part to higher gasoline prices. Retail sales excluding automobiles, gasoline, building materials and food services ticked up 0.1 percent last month after an upwardly revised 0.1 percent gain in February.

The producer price index, a measure of inflation at the wholesale level, slipped 0.1 percent last month after dropping 0.2 percent in February. In the 12 months through March, the PPI dipped 0.1 percent after being unchanged in February. Rising energy prices were offset by a decline in the cost of services, pointing to tame inflation.

Last month, energy prices rose 1.8 percent, with gasoline prices surging 7.1 percent in what was the largest increase since May 2015. Wholesale food prices fell 0.9 percent last month. Weak producer prices suggest overall inflation will remain below the Fed’s 2 percent target for a while.

The Federal Reserve published its Beige Book. Two weeks before a FOMC policy meeting the Fed compiles anecdotal reports from the 12 Fed districts to help guide them. Today’s Beige Book shows the economy continued to expand from late February to early April and low unemployment appears to be spurring an uptick in wage growth. Pay increased in all but one of the Fed’s 12 regional bank districts and several reported signs of a pickup in wage growth.

Consumer spending increased only modestly in most districts and while capital spending increased on balance, there was only scattered reports of spending for capacity expansion. Manufacturing increased in most districts but expectations for future growth were mixed. One particular bright spot in the employment picture was the healthcare sector.

In an interview with Time magazine, Federal Reserve Chair Janet Yellen said that the Fed is unlikely to make any sudden or aggressive moves, given the lingering uncertainty in current global economic conditions.

JPMorgan Chase (JPM) reported first quarter earnings of $1.35 per share, down from $1.45 a year ago, but better than the $1.24 per share consensus estimate. Overall, JPMorgan reported first quarter revenue of $24 billion, which was stronger than the $23.8 billion expected. JPMorgan gained more than 4% today because the earnings report wasn’t as bad as it could have been, I guess.

One of the big stories in the global markets and economy continue to be persistently low energy prices. While this may be good news for consumers, it’s bad news for the investors and creditors of drillers. JPMorgan’s provision for credit losses was $304 million, compared to $61 million in the prior-year quarter.

Five out of eight of the biggest US banks do not have credible plans, or what is known as a “living will”, for winding down operations during...