Markets Higher, Closing News 3/13/12

Markets spent most of the day in positive territory as most of the focus centered on US economic news, FOMC comments and a late day announcement from JP Morgan on its response to the Fed’s bank stress test.

Retail sales were +0.9% (+0.7% expected) driven largely by auto sales; markets were encouraged by the latest sign that consumers are starting to spend.

The Federal Reserve’s full report on its "worst-case scenario" bank stress test was not expected until Thursday at 4:30 p.m. ET.  However, after JP Morgan released its capital plan in response to the Fed’s test, reports ran that the Fed would be releasing its report at 4:30 p.m. today.   The Fed’s stress criteria includes reviewing how the nation's 19 largest banks would survive a world with a 13 percent jobless rate, a 50-percent drop in stocks, a 21-percent decline in housing prices and a significant contraction of other major world economies.  Although this test is conducted annually, this is the first time since 2009, when billions in insufficient funds were found on bank balance sheets, that the Fed released its report to the public. The tests were set up to insure the country’s biggest banks have enough cash to support the economy in a potential financial crisis.

The Fed released its minutes today which were not hugely surprising though somewhat comforting.  Fed officials noted that the labor market continues to improve; household spending advanced; the economy continues to expand.  Although there are still some economic risks that remain including the slow pace of lowered unemployment and the risk of rising inflation as oil and gas prices increase.  The bank kept rates at “exceptionally low levels” of 0.25% and confirmed that it still plans on doing so through late 2014.  There was no guidance given on whether the central bank is considering additional quantitative easing measures; though, it seems as though that is becoming less likely as positive economic news continues to stream.

Today marked the first day that the DJIA closed above 13,000 and the Nasdaq closed above 3,000.

Market Indices/Statistics:

  • Dow closed up 217.97 pts/+1.68% to 13,177.68

  • S&P closed up 24.86 pts/+1.81% to 1,395.95

  • Nasdaq closed up 56.22 pts/+1.88% to 3039.88

  • All 30 Dow stocks closed higher

  • All 10 S&P 500 sectors closed up

  • Financials was the most positive sector (+3.92%);  Utilities was the least gaining sector (+0.21%)

  • The VIX was down 0.84 to 14.80

  • Oil is up $0.40 to $107.24

  • Nat Gas is up $0.035 to $2.408

  • Gold is down $5.60 to $1,694.20

  • Euro vs. Dollar is up $0.0004 to $1.3079

  • Dollar vs. Yen is down $0.02 to $82.87

Companies in the News:

A handful of responses from banks to the Federal Reserve bank stress test include:

Four banks were seen as having “failed” some of the Fed’s stress test criteria, including MetLife Inc., SunTrust Banks, Inc., Citigroup Inc. and Ally Financial Inc.  The first three securities traded are currently trading down about 3% in the after-market. 

JP Morgan (JPM, +$2.85/+7.0% to $43.39) announced its capital plan in response to the Fed’s bank stress test which includes raising its quarterly dividend 20% to $0.30 and launching a $15.0 billion equity repurchase program.  JPM’s news sent markets soaring in late day trading.

BB& T Corp (BBT, +$1.09/+3.7% to $30.40) announced its capital plan in response to the Fed’s bank stress test which includes raising its quarterly dividend 25% to $0.20.  The company also announced that it received the Fed’s approval to redeem $3.2 billion of trust preferred securities without issuing replacement capital.

US Bancorp (USB, +$1.33/+4.5% to $31.01) announced its capital plan in response to the Fed’s bank stress test which includes raising its annual dividend 56% to $0.78 or $0.195 quarterly and launching a 100 million share repurchase program. 

Regions Financial (RF, +$0.15/+2.7% to $5.78) announced its capital plan in response to the Fed’s bank stress test which includes a $900 million common stock offering part of this capital raising effort will be directted toward repurchasing $3.5 billion of Series A Preferred Stock issued to the U.S. Treasury Department under the TARP and CPP plans.


Urban Outfitters Inc. (URBN, -$1.85/-6.3% to $27.95) reported Q4 EPS of $0.27 vs. estimates of $0.29; revenue was $730.6 million vs. estimates of $740.0 million.  Shares moved higher last night initially thanks to the company’s ability to contain inventory and increase sales – even as margins were hurt by year-end sales strategies.  However, concern over continued markdowns in the coming year put pressure on the stock today.

Coming Wednesday:

Economic Reports:   Weekly Mortgage Applications (-1.2% previously) at 7:00 a.m.; Feb. Import Price Index (+0.6% expected) and Q4 Current Account Balance (-$115.0 billion) at 8:30 a.m. Earnings:  Guess? Inc. (est: $1.05), Talbots Inc. (est: $-0.56), Youku Inc. ADS (est: $-0.06)

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