Ultimate Market Recap: Yahoo Shocker, Citigroup and Wells Fargo Open Books
Tuesday Morning’s Top Stories
China (NYSE:FXI) reported its GDP growth slowed to an annualized 8.9 percent rate, representing its lowest expansion since mid-2009 but exceeding expectations of 8.7 percent. The country’s slowed growth came from a declining export demand and a weakening property market. Also noted today, China’s urban population exceeded its rural population in 2011 for the first time in the country’s long history, affecting jobs and social services.
Over in Europe, the euro zone’s annual inflation dropped to 2.7 percent in December, down from November’s 3 percent. Core CPI held steady at 1.6 percent. For Germany (NYSEARCA:EWG), its ZEW Economic Sentiment Indicator jumped 32.2 points to -21.6 this month. The figure is lower than its historical average of 24.5, but it suggests that in the next six months, there could be a stabilization of economic activity and the country could see a “dent” in its economy rather than a recession.
In 2011, U.S. companies repurchased $397 billion of stock and issued $169 billion of new equity, according to data by Birinyi Associates. These numbers represent the first market shrinkage since 2009. According to money manager Laton Spahr, “Having that equity base shrink and starting from a relatively pessimistic point usually sets up pretty well in the long term. It gives you some hope that valuations have perhaps bottomed.”
Morgan Stanley (NYSE:MS) will inform employees this week that individual cash bonuses will be capped at $125,000, in an effort to keep costs down in light of tightened regulation and a difficult 2011, according to the Wall Street Journal. CEO James Gorman and other top executives will defer their bonuses.
Capital One Financial Corp. (NYSE:COF) saw delinquencies and charge-offs at its U.S. credit-card business fall in December. The numbers came in below 2010 figures but progress has been inconsistent. In December, 30-day delinquencies fell to 3.66 percent vs. November’s 3.73 percent. Net charge-offs dropped to 3.98 percent in December from the previous month’s 4.29 percent, according to a Securities and Exchange Commission filing.
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Tuesday Morning Hot Stocks
Carnival Corp. (NYSE:CCL) shares are down more than 14 percent in early trading. The company is facing intense pressure after its Costa Concordia cruise ship ran aground off the coast of Italy last week. At least six people are dead, while 29 are still missing.
Shares of Wells Fargo & Co. (NYSE:WFC) are gaining 1.11 percent early Tuesday. The bank posted a 20 percent jump in fourth quarter profits. Net income increased to $4.11 billion (73 cents per share), compared to $3.41 billion (61 cents per share) last year. Shares of JP Morgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) are heading lower this morning. Investing Insights: Wells Fargo & Co. Earnings: Profit Rises by Double-Figures for Fifth Consecutive Quarter.
Citigroup Inc. (NYSE:C) shares are down 5 percent after missing fourth quarter estimates. Net income fell to $1.17 billion (38 cents per share), compared to $1.31 billion (43 cents per share) last year. Investing Insights: Citigroup Inc. Earnings: Falls Below Expectations as Net Income Declines.
Morgan Stanley (NYSE:MS) shares are heading lower Tuesday morning. The bank announced it is capping immediate cash bonuses at $125,000 as the company defers more pay for senior executives.
Hasbro Inc. (NYSE:HAS) shares are trading 1.6 percent higher. The toy maker reported a preliminary fourth quarter sales number of $1.33 billion. The number was below the consensus, but the company expects to see EPS up 2 to 4 percent.
TD Ameritrade Holding Corp. (NASDAQ:AMTD) fell 1 percent after reporting a profit miss. The company earned $152 million (27 cents per share) in the fourth quarter, compared to $145 million (25 cents per share) last year. Shares of Charles Schwab Corp. (NYSE:SCHW) are gaining .50 percent.
Investor Insights: Global Factors Boost Gold and Silver Demand.
Markets closed up on Wall Street today: Dow +0.48%, S&P+0.36%, Nasdaq +0.64%, Oil +2.10%, Gold +1.26%.
On the commodities front, Oil (NYSE:USO) climbed to $100.77 a barrel. Precious metals were also up, with Gold (NYSE:GLD) climbing to $1,651.30 an ounce while Silver (NYSE:SLV) rose 1.65% to settle at $30.69.
Hot Feature: Shale Glut Driving Down Electricity Prices.
Today’s markets were up because:
1) Data. A government report today showed China’s economy to have grown at an annual rate of 8.9% in the last three months of 2011, faster than economists had expected. Investors were also encouraged when a German sentiment index came in better than expected, and a New York regional manufacturing index topped expectations thanks to strength in new orders and employment. The three pieces of news, which positive signs for three of the biggest economies in the world, supported global stock markets today, helping investors shrug off Standard & Poor’s downgrade of nine euro-zone governments and Europe’s bailout fund.
2) Greece. A Fitch Ratings official told Reuters today that, “Greece is insolvent so it will default.” Greek officials and private investors are set to resume debt talks on Wednesday after negotiations broke down last week over the interest rate on new bonds Greece will offer and a plan to enforce investor losses. Without the so-called “PSI” deal, which would see Greece’s creditors voluntarily giving up a lot of of their promised returns, the EU and IMF have warned that they will not consider Athens’ debt to be back on a sustainable track and will not release further aid. Greece’s private creditors have warned that a deal must be reached soon if the government is to avoid a disorderly default when a major bond redemption comes due in late March.
3) Banks. Despite a broad rally, bank stocks are down today on lackluster earnings reports from JPMorgan (NYSE:JPM) and Citigroup (NYSE:C). Bank of America (NYSE:BAC) was down around 2 percent today, as was Morgan Stanley (NYSE:MS), which recently announced it willcap immediate cash bonuses at $125,000 this year as the firm curtails pay and defers more compensation for senior executives. Wells Fargo (NYSE:WFC) was the sole gainer of the major banks after reporting that its income rose 20 percent in the fourth quarter as its mortgage business steadied and deposits grew.
After Hours Radar Stocks
Yahoo! Inc. (NASDAQ:YHOO) shares jumped more than 4 percent after the closing bell. The company announced that Jerry Yang has resigned from its Board of Directors and all other positions with the company. Shares of Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) are trading slightly lower in late trading.
After closing more 1.16 percent higher, shares of Apple Inc. (NASDAQ:AAPL) continue to trade higher in late trading. On Tuesday, shares closed at a new all-time high of $424.70.
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Shares of Hewlett Packard Co. (NYSE:HPQ) are falling .47 percent in extended trading. The tech company said it has named Bill Veghte as its chief strategy officer. Veghte will also continue in his position of executive VP of software.
Despite closing 1.25 percent higher on Tuesday, shares of Hasbro Inc. (NYSE:HAS) are edging .30 percent lower after the closing bell. The toy-maker expects to report fourth quarter revenue below Wall Street’s estimates. Hasbro will release full results for the quarter on February 6.
Investor Insight: Are Citigroup’s Earnings Worse Than They Appear?
Banking stocks are trying to stabilize in late trading. Shares of Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC) and Citigroup (NYSE:C) are all edging higher after the closing bell. Early Tuesday, Citigroup reported that fourth quarter net income fell to $1.17 billion (38 cents per share), compared to $1.31 billion (43 cents per share) last year. The results fell short of the mean analyst estimate of 50 cents per share.
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