January 13, 2016

Stocks opened higher today (Dow +7 pts; SPX +.28%). Financials are powering ahead, up 1.1% in early trading. Biotechs and semiconductors are also up nearly 1%. Utilities, REITs and materials stocks are down modestly. The VIX Index is down again, now trading around 11, giving room for the stock market to run. Oil prices are down a bit to trade around $52.40/barrel, but anything over $50 will likely be conducive to the stock rally. Bond prices are lower on the day as yields tick up. The 5-year and 10-year Treasury yields are trading at 1.91% and 2.41%, respectively. 

Earnings season kicked off today with the banks. JP Morgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) reported fourth quarter 2016 earnings this morning. In general, the banks reported solid results and have a positive outlook for profit margins due to rising interest rates. The stocks are up 1-2% this morning. JP Morgan beat both revenue and earnings expectations. And earnings rose 16% from year-ago levels. Importantly, the credit environment is improving and the bank removed some capital from its loan loss reserves. Bank of America’s revenue and earnings came in slightly below Wall Street forecasts even though earnings were up 32% from year-ago levels. Management raised current quarter earnings guidance. Wells Fargo’s earnings were flat with year-ago levels due to declining mortgage business. But the bank’s net interest margin increased to 2.87% from 2.82%. And management announced an initiative to cut operating costs by $2bil. 

Blackrock (BLK) reported decent quarterly results, with 1% y/y revenue growth and 8% y/y earnings growth. The firm saw its total assets under management surge 11% to %5.5 trillion. The firm has been cutting fees on its investment products to attract assets. The stock is up 1.3% this morning. 

The Nat’l Retail Federation says holiday retail sales grew 4% vs. its forecast for 3.6%. CNBC notes this is significantly better growth than the long-term average of about 2.5%. And by the way, Mastercard’s estimate of holiday sales growth is also 4%. But as we know, most of that accrued to online retailers. The NRF says “non-store” sales shot up 12.6% from year-ago levels. Separately, the Commerce Dept. reports US retail sales rose 4.1% y/y in December. That’s a very strong figure, but it was driven by better auto sales. If you back out autos, retail sales grew 3.4% y/y.   

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