February 7, 2023

A Closely Watched Gauge Suggests Stronger Growth

The Conference Board, a business research group, said on Thursday that its index of leading indicators increased 0.6 percent last month to a reading of 96. There was no change in June and a 0.2 percent increase in May. The index is composed of several previously released pieces of data and can signal economic conditions over the next three to six months.

The solid gain suggests that economic growth is picking up after a weak start. The economy grew at an annual rate of 1.4 percent from January through June. Many economists say that growth could improve to a 2.5 percent rate in the second half of 2013.

The pace of growth measured by the index over the last six months has nearly doubled, “pointing to a gradually strengthening expansion through the end of the year,” said Ataman Ozyildirim, an economist at the Conference Board.

Eight of the 10 components of the index were positive in July. Higher stock prices, more requests for building permits and a decline in weekly applications for unemployment benefits made the biggest contributions.

The only measures to decrease were the average manufacturing workweek and orders for manufactured goods, which signal business investment plans.

A separate report on Thursday showed that the number of Americans applying for jobless benefits rose last week after reaching the lowest level in more than five years. But the broader trend suggests that companies are laying off fewer employees and could step up hiring in the months ahead.

The Labor Department said applications for first-time benefits rose 13,000 to a seasonally adjusted 336,000 in the week ended Saturday. The four-week average, which smooths out week-to-week fluctuations, fell 2,250, to 330,500. That is the sixth consecutive decline and the lowest for the average since November 2007.

Article source: http://www.nytimes.com/2013/08/23/business/economy/indicators-offer-hope-for-stronger-growth.html?partner=rss&emc=rss

DealBook: Strong JPMorgan Profits Give Banks a Boost

Jamie Dimon, chief of JP Morgan Chase.Andrew Harrer/Bloomberg NewsJamie Dimon, chief of JPMorgan Chase.

12:22 p.m. | Updated JPMorgan Chase reported on Thursday that second-quarter profit rose 13 percent, to $5.4 billion, from the period a year earlier, despite lingering mortgage troubles.

It was a decent start to earnings season for the banking industry, which is confronted by a stagnant economy in the United States, fiscal troubles in Europe and global regulatory uncertainty.

Despite market weakness, JPMorgan had a solid showing in its Wall Street businesses. The results on the consumer side were varied. With credit defaults on the decline, the bank saw a $1 billion benefit from the reversal of more funds that had been set aside for loan losses. Even so, the home lending unit continued to struggle, as the bank added $1.3 billion to its litigation reserves mainly related to the mortgage business.

Overall, JPMorgan announced a profit of $5.4 billion during the second quarter, or $1.28 a share, easily besting analyst consensus estimates of $1.21 a share. Earnings were down modestly from the $5.6 billion, or $1.29 a share that it earned in the first quarter, when its investment banking unit had an unusually strong trading record.

Revenue — under pressure across the banking industry – was relatively strong. At JPMorgan, it rose 7 percent from a year earlier to $27.4 billion, amid a modest uptick in lending and strong investment banking results.

“The results were better than expected, but the environment is still very challenging,” said Jason Goldberg, a Barclays banking analyst.

The strong earnings at JPMorgan, a diversified bank that is often considered a crucial indicator for the rest of financial industry, could give a much-needed jolt to bank stocks, which have fallen sharply over the last few weeks. Shares of JPMorgan were up more than 2.5 percent in the first half of the day. Citigroup reports on Friday, while Bank of America, Goldman Sachs, Wells Fargo, and Morgan Stanley will release their results in the coming weeks.

Still, investors are increasingly worried about the banks’ prospect for growth. Troubling unemployment trends, higher capital requirements, and the eliminating of lucrative fees are raising questions about where they will find new sources of revenue. Stock and bond trading, which has helped prop up the banks results over the last two years, is waning as nervous investors rush to the sidelines with cash.

Jamie Dimon, JPMorgan’s chairman and chief executive, put a positive spin on his bank’s second quarter results. In a statement, he praised a “solid performance across most of our businesses” and noted a marked improvement in credit that was approaching a “more normalized environment” in both its consumer and corporate lending operations. The financial firm felt comfortable enough to buy back $3.5 billion of stock during the second quarter.

He also played down the bank’s exposure to the European debt crisis. He said that JPMorgan’s exposure to the Greece, Italy, Portugal and Spain was about $15 billion, net of hedges.

“If worst case happens,” he said on the conference call with journalists, “it will cost us $3 billion after tax.

But questions loom over two of its biggest businesses: its home lending unit and its investment bank.

With mortgage losses running at almost $5 billion a year, Mr. Dimon replaced several of the managers responsible for running the unit in late June and vowed to fix past mistakes. But troubled loans keep haunting the bank.

The firm faces billions of dollars in potential legal claims stemming from the housing crisis. Federal and state regulators are leaning hard on it and other large servicers to radically overhaul servicing operations, changes that are driving up costs.

Then there’s the expected settlement over mortgage issues. Bank of America warned late last month that it planned to absorb a $20 billion hit to its earnings to clean up its mortgage – and it still could add billions more to cover future losses. Although JPMorgan moved faster that peers to address the issues, it could take awhile to put their mortgage problems behind.

In the statement, Mr. Dimon said that despite a modest improvement in loan performance, he expected that losses would remain elevated. The bank also took another $1 billion charge to cover increased foreclosure expenses and the cost of an expected regulatory settlement, on top of the $1.1 billion hit it took in the first quarter to cover the spiraling costs of servicing loans.

“We have been working hard to fix our problems and address past mistakes,” he said. “Unfortunately, it will take some time to resolve these issues and it is possible that we will incur additional costs along the way.”

The bank put aside another $1.3 billion in the second quarter to cover legal claims from investors seeking to recoup losses on loans that went bad. JPMorgan has added over $7.3 billion to its litigation reserves over the last five quarters, and established a separate reserve of more than $5.6 billion to cover losses stemming from the repurchase of faulty loans sold to Fannie Mae and Freddie Mac, the government-controlled finance companies.

Banking analysts say the mortgage problems could cost the bank up to $9 billion. But armed with those reserves, JPMorgan Chase executives have said they have ample resources to cope with the expected losses.

JPMorgan’s investment bank fared better. Its fixed-income and commodities operations were particularly hard hit, falling more than 18 percent from the first three months of the year amid a sharp reversal in the markets in early May. Stock trading revenue was down 13 from the first quarter because of lower volumes.

But the investment bank benefited from an improvement in its credit portfolio as well as strong performance in its deal advisory and equity writing businesses. Investment banking fees rose 8 percent from first quarter.

The bank’s other major businesses performed well, despite the challenging economic environment. Its credit card lending arm posted a $911 million profit after yet another big release of funds it had set aside to cover losses. The big commercial banking unit booked a $611 profit, amid a 9 percent increase in revenue.

Chase Retail banking, which includes the troubled mortgage group, squeezed out a $582 million profit. Meanwhile, the asset management and treasury services units also had decent quarters amid the turbulent markets.

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Import Prices Fall for First Time in a Year

Prices of goods imported to the United States fell in June for the first time in a year as oil and food expenses retreated, the Labor Department said Wednesday.

The 0.5 percent fall in the import-price index followed a revised 0.1 percent gain in May, the figures showed. Economists projected a 0.6 percent decrease for June, according to the median estimate in a Bloomberg News survey. Prices excluding petroleum fell 0.2 percent, the first decline since July 2010.

“The drop is really reflective of what we’re expecting for the second half of the year with weaker energy and food prices,” said David Semmens, a United States economist at Standard Chartered Bank in New York. “This really feeds into the transitory story that you’ve been hearing from the Fed.”

Compared with a year earlier, import prices rose 13.9 percent, the biggest 12-month advance since August 2008, the report showed.

The cost of imported petroleum fell 1.6 percent from the previous month, the largest one-month drop since June 2010. Even with the decrease, the cost was still up 50 percent from a year earlier.

Excluding all fuels, import prices decreased 0.1 percent from the previous month and were up 4.8 percent from June 2010. The 12-month gain was the biggest since October 2008.

Imported food was 1.9 percent cheaper last month, the largest decline since February 2009. A 2.6 percent drop in unfinished metals also helped hold down nonfuel import costs.

Rising costs for automobiles limited the overall decline in prices. Costs of imported automobiles, parts and engines climbed 0.3 percent, and were up 2.9 percent over the last 12 months. It was the biggest yearly gain since August 2008.

Consumer goods excluding vehicles rose 0.1 percent after increasing 0.3 percent in May.

The cost of goods from China climbed 0.1 percent, the smallest gain since September, while those from Japan were little changed, the report showed. Goods from Latin America fell 1.1 percent, and those from the European Union increased 0.1 percent. Prices of Canadian imports dropped 1 percent, and goods from Mexico fell 2.2 percent, the biggest decline since November 2008.

Export prices increased 0.1 percent after advancing 0.2 percent the previous month, the figures showed. Prices of farm exports rose 0.7 percent, while those of nonfarm goods were little changed.

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Boeing Chief Says Rivet Flaws Appear Limited to One Jet

The executive, W. James McNerney, told analysts that preliminary data “points more in that direction.”

The National Transportation Safety Board issued an interim report on Monday, saying that a laboratory examination of intact sections of the roof found that rivet holes on one layer of the plane’s skin did not line up properly with an underlying layer.

A five-foot hole suddenly ripped open in the cabin roof on April 1, forcing the Southwest jet to make an emergency landing in Arizona.

The safety board did not draw any conclusions about the cause of the rupture, which occurred at 34,000 feet. Independent experts said they were surprised that Boeing’s inspectors had not caught such a basic mistake when the plane was built in the mid-1990s.

Mr. McNerney said federal investigators were still sorting out what happened.

His comments came as Boeing announced that its first-quarter earnings rose 13 percent to $586 million, or 78 cents a share, from $519 million, or 70 cents a share, a year earlier. Revenue slipped 2 percent to $14.9 billion, from $15.2 billion, on weaker revenue in the commercial airplane business.

The company, which also has a large military business, reaffirmed its guidance for the year, with revenue expected to be $68 billion to $71 billion and earnings to be $3.80 to $4 a share.

Mr. McNerney said that Boeing remained on track to make the first deliveries of its new 747-8 freighter and its long-delayed 787 Dreamliner passenger plane, and that it still expected to deliver 25 to 40 of these two models this year.

He said the 787 deliveries would include a mix of the first planes it has built, which have needed extensive reworking to fix poorly made parts from suppliers, and the latest jets, which are coming off the production line in much better shape.

The 787, built with lightweight composite materials to lower fuel costs, has attracted more sales — about 850 — than any commercial plane in history. But the production problems have added billions of dollars in costs, and Mr. McNerney said the project’s profitability would eventually be decided by how well longer-range versions of the plane sell.

Mr. McNerney also said that Airbus’s plan to update its A320 series with new engines was taking sales from smaller competitors, like Canada’s Bombardier, rather than from Boeing. He said Boeing was still likely to forgo changing the engines on its 737 models and seek to introduce a new plane by 2019 or 2020.

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Wall Street Ends Higher, Added by Upbeat Earnings

Corporate earnings have returned to prominence after a period when investors were focusing on other issues, like Japan’s earthquake and tsunami, Europe’s debt crisis and the unrest in the Arab world.

So far, the earnings reports have been generally positive. General Electric and UnitedHealth were among the large companies whose quarterly results beat analysts’ expectations Thursday morning.

Net income for G.E. was $3.4 billion in the first three months of 2011, or 31 cents a share, compared with $1.9 billion and 17 cents in the quarter a year ago. But Wall Street was expecting stronger revenue from G.E.’s industrial side and shares fell 2.2 percent.

UnitedHealth, the country’s second-largest health insurer, said its profit rose 13 percent as more employees signed up for coverage. UnitedHealth rose 7.8 percent. In the financial sector, Morgan Stanley, which like its peers is still feeling the aftereffects of the financial crisis, posted first-quarter earnings on Thursday of $736 million, down 48 percent from the period a year earlier. It also recorded a $655 million loss from a Japanese joint venture. Its shares rose 1.8 percent.

Apple reported results late Wednesday that beat estimates for both sales and profits. Apple rose 2.6 percent.

“In the past couple of days, the U.S. earnings season has enabled investors shrug off the euro woes and budget deficit concerns that dogged the early part of the week,” a senior sales trader at IG Index, Yusuf Heusen, said.

But the gains were tempered slightly by a Labor Department report that the number of people who applied for unemployment benefits fell last week to 403,000. Economists had expected a bigger drop, but applications had unexpectedly climbed to a two-month high the previous week.

At the close, the Dow Jones industrial average was 52.45 points, or 0.42 percent, higher to 12,505.99. The broader Standard Poor’s 500-stock index gained 7.02 points, or 0.53 percent, to 1,337.38. The technology heavy Nasdaq added 17.65 points, or 0.63 percent, to 2,820.16. Markets will be closed on Friday for the Easter holiday.

Better earnings from the chip maker Intel and other technology companies sent shares higher on Wednesday and drove the Dow Jones industrial average to a new 2011 high. The Nasdaq composite index gained 57 points, its biggest one-day jump in six months.

In Europe, the FTSE 100 in London was down less than 0.1 percent, while the DAX in Frankfurt rose 0.6 percent. The CAC 40 in Paris was 0.4 percent higher.

Markets have pushed higher since Monday’s retreat when investors were spooked by Standard Poor’s warning that the United States faces a one-in-three chance of having its triple-A credit rating downgraded.

“Monday is a distant memory and markets have shifted from shunning risk into the upcoming holiday period to assuming as much of it as they can,” said Robert Ryan, a foreign exchange strategist at BNP Paribas.

In the bond market, Treasury prices edged up as investors seek stable assets ahead of the long holiday weekend.

The price of the 10-year Treasury note as its yield slipped 3.39 to percent from 3.41 percent late Wednesday.

The bond market closes early Thursday and is closed Friday for the Good Friday holiday. Traders typically take cautious positions ahead of long weekends and auctions of new debt.

The Treasury will auction $35 billion in two-year notes Tuesday, $35 billion in five-year notes Wednesday and $29 billion in seven-year notes Thursday.

Earlier in Asia, Japan’s Nikkei 225 index closed up 0.8 percent, to 9,685.77 while South Korea’s Kospi index rose 1.3 percent, to 2,198.54. Hong Kong’s Hang Seng ended 1 percent higher, to 24,138.31, and mainland China’s Shanghai Composite Index rose 0.7 percent, to 3,026.67.

In the oil markets, the focus remained on the fighting in Libya. Oil prices have increased 20 percent since the beginning of the year as investors anticipated rising global demand while unrest in North Africa and the Middle East threatened oil fields and shipping lanes vital to world supply.

Benchmark crude for June delivery rose 77 cents, to $112.22 a barrel in New York trading. The contract rose $3.17 to settle at $111.45 on Wednesday.

In the currency markets, the dollar fell to a 16-month low against the euro with investors expecting the Federal Reserve to keep interest rates near zero.

Higher rates tend to support a currency’s value because they can generate a bigger return on investments denominated in that currency — lower rates make a currency less appealing. The Fed has kept its key rate near zero since December 2008, while most of the world’s other central banks are raising interest rates.

The Fed next meets to talk about interest rates and other monetary policy on Tuesday and Wednesday. The central bank is not expected to cut short the $600 billion bond-purchasing program, set to expire in June, that was designed to drive down interest rates.

In afternoon trading in New York, the euro was worth $1.4577, up from $1.4514 late Wednesday. The euro earlier rose as high as $1.4648, its strongest level since December 2009.

The British pound rose to $1.6551 from $1.6407, while the dollar fell to 81.77 Japanese yen from 82.37 yen.

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Wall Street Tries to Maintain Momentum

Corporate earnings have returned to prominence after a period when investors were focusing on other issues, like Japan’s earthquake and tsunami, Europe’s debt crisis and the unrest in the Arab world.

So far, the earnings reports have been generally positive. General Electric and UnitedHealth were among the large companies whose quarterly results beat analysts’ expectations Thursday morning.

Net income for G.E. was $3.4 billion in the first three months of 2011, or 31 cents a share, compared with $1.9 billion and 17 cents in the quarter a year ago. G.E. shares, however, were 2 percent lower.

UnitedHealth, the country’s second-largest health insurer, said its profit rose 13 percent as more employees signed up for coverage. UnitedHealth rose 8.4 percent. In the financial sector, Morgan Stanley, which like its peers is still feeling the aftereffects of the financial crisis, posted first-quarter earnings on Thursday of $736 million, down 48 percent from the period a year earlier. It also recorded a $655 million loss from a Japanese joint venture. Its shares rose 3 percent.

Apple reported results late Wednesday that beat estimates for both sales and profits. Apple rose 2.6 percent.

“In the past couple of days, the U.S. earnings season has enabled investors shrug off the euro woes and budget deficit concerns that dogged the early part of the week,” a senior sales trader at IG Index, Yusuf Heusen, said.

But the gains were tempered slightly by a Labor Department report that the number of people who applied for unemployment benefits fell last week to 403,000. Economists had expected a bigger drop, but applications had unexpectedly climbed to a two-month high the previous week.

In midmorning trading, the Dow Jones industrial average was 13.47 points, or 0.1 percent, higher. The broader Standard Poor’s 500-stock index gained 4.96 points, or 0.4 percent. The technology heavy Nasdaq added 11.88 points, or 0.4 percent. Markets will be closed on Friday for the Easter holiday.

Better earnings from the chip maker Intel and other technology companies sent shares higher on Wednesday and drove the Dow Jones industrial average to a new 2011 high. The Nasdaq composite index gained 57 points, its biggest one-day jump in six months.

In Europe, the FTSE 100 in London was down 0.2 percent, while the DAX in Frankfurt rose 0.6 percent. The CAC 40 in Paris was 0.4 percent higher.

Markets have pushed higher since Monday’s retreat when investors were spooked by Standard Poor’s warning that the United States faces a one-in-three chance of having its triple-A credit rating downgraded.

“Monday is a distant memory and markets have shifted from shunning risk into the upcoming holiday period to assuming as much of it as they can,” said Robert Ryan, a foreign exchange strategist at BNP Paribas.

Earlier in Asia, Japan’s Nikkei 225 index closed up 0.8 percent to 9,685.77 while South Korea’s Kospi index rose 1.3 percent to 2,198.54. Hong Kong’s Hang Seng ended 1 percent higher to 24,138.31, and mainland China’s Shanghai Composite Index rose 0.7 percent to 3,026.67.

In the oil markets, the focus remained on the fighting in Libya. Oil prices have increased 20 percent since the beginning of the year as investors anticipated rising global demand while unrest in North Africa and the Middle East threatened oil fields and shipping lanes vital to world supply.

Benchmark crude for June delivery fell 8 cents to $111.37 a barrel in New York trading. The contract rose $3.17 to settle at $111.45 on Wednesday.

Article source: http://feeds.nytimes.com/click.phdo?i=fecff839a22c948f7572ca98def07b63