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Monday September 1, 2014



Bank of America Regaining Strength

Bank of America Corporation (BAC) announced its fourth quarter results on Wednesday, January 15. Having endured tough times in recent years, the quarterly results capped a bounce back year for the company.

Bank of America reported quarterly revenue of $21.7 billion for a 15% increase over the $18.89 billion reported during the same period last year. Analysts expected revenue to be lower at $21.2 billion.

Net income for the quarter was $3.4 billion or $0.29 per share. This was a big jump over the $732 million or $0.03 per share reported during the comparable quarter last year.

"We are pleased to see the core businesses continue to perform well, serving our customers and clients," said Chief Executive Officer Brian Moynihan. "While work remains on past issues, our two hundred forty thousand teammates continue to do a great job winning in the marketplace."

Bank of America's stock has risen close to 11% this year. The company has been making a comeback since it hit tough times a little over two years ago when many analysts wondered if the bank would survive. Following the earnings announcement, the stock rose 3.6% and closed at $17.11 on January 15. The stock is still a long way from its peak of $55 back in 2006.

Bank of America Corporation (BAC) shares ended the week at $17.01.

Wells Fargo Increases Quarterly Profit

Wells Fargo & Company (WFC) reported its fourth quarter results on Tuesday, January 14. Despite a decline in revenue from a year before, the company reported a 10.2% increase in profit.

The company reported quarterly revenue of $20.67 billion, which was a 5.8% decrease from the $21.9 billion reported during the same time last year. Expectations were for Wells Fargo's revenue to be slightly higher at $20.69 billion.

Net income for the quarter was $5.61 billion, or $1.00 per share, compared to $5.09 billion, or $0.91 per share, reported during the comparable period last year. The $1.00 per share figure beat estimates that earnings per share would be $0.98.

Wells Fargo Chairman and CEO John Stumpf had this to say about the quarterly results, "Wells Fargo had another outstanding year in 2013, including strong growth in loans and deposits, and double-digit growth in earnings. In the five years since our merger with Wachovia, we have grown our businesses, invested in our franchise's future and contributed to the U.S. economy's recovery."

Wells Fargo's stock price has experienced a significant boon this past year, rising close to 31%. Following the earnings announcement on Tuesday, the stock price fell slightly as investors had mixed feelings about the bank's slight revenue decline combined with a significant profit increase. After closing at $45.59 on Tuesday, January 14, the stock price jumped to over $46 per share by Wednesday, January 15.

Wells Fargo & Company (WFC) shares ended the week at $46.39.

Intel Faces Challenging Future

Intel Corporation (INTC), the world's largest chipmaker, announced its quarterly results on Thursday, January 16. Investors were disappointed that the company's results fell short of expectations. The company's results reflect the fact that a drop in PC sales is hurting the company's bottom line.

The company reported revenue of $13.8 billion for the quarter, a 3% increase over the $13.5 billion reported during the same period last year. Despite the increase, revenue fell short of estimates that revenue would be $13.7 billion.

Intel reported net income for the quarter of $2.6 billion or $0.51 per share. This was an increase of 6% over the $2.5 billion or $0.48 per share reported during the same period last year.

Intel CEO Brian Krzanich had these comments about the company's results, "We had a solid fourth quarter with signs of stabilization in the PC segment and financial growth from a year ago. We've built a strong foundation for our business by bringing innovation to the market more quickly across a wide range of computing platforms. For example, at CES, we demonstrated multiple devices that weren't on our roadmap six months ago."

Intel has been facing a tough transition the past few years, its current fate intricately intertwined with that of personal computers. PC sales declined 10% in 2013, the largest recorded drop for the industry, as consumers shifted away from PCs toward tablets and smartphones. Intel, the largest producer of PC chips, has seen its bottom line suffer as a result. Following the results, Intel's stock price fell more than 4% during after-hours trading.

Intel Corporation (INTC) shares ended the week at $28.85.

The Dow started the week of 1/13 at 16,434 and closed at 16,459 on 1/17. The S&P 500 started the week at 1,841 and closed at 1,839. The NASDAQ started the week at 4,167 and closed at 4,198.

Treasuries Slump on Negative Economic News

Treasury yields rose slightly on Friday, January 17, pushing prices down, as mixed reports concerning consumer sentiment, construction and industrial production were released. Following the abysmal jobs report last week, the mixed economic news this week reaffirmed fears that the recovery is far from gaining strength.

The Thomson Reuters/University of Michigan consumer sentiment index for January dropped to 80.4 from 82.5 in December, a sign the economic recovery is far from gaining steam. The consumer sentiment drop was significant and well below the 84 reading economists expected.

In addition to the negative consumer sentiment news, data showed new home construction declined 9.8% in December to an annualized rate of 999,000. The decline was especially disappointing because of the surge for new home construction recorded in November, the strongest pace since 2007, at a pace of 1.11 million. Economists expected the decline, however, predicting colder weather would reduce new home construction to 985,000.

The additional negative economic news this week means the Federal Reserve is probably unlikely to take further action beyond its previously announced decision to begin reducing monthly bond purchases.

"These numbers are saying that the recovery we thought was ready to explode is anemic, at best," said Michael Franzese, Senior Vice President of Fixed-Income Trading at ED&F Man Capital Markets. "The Fed is not going to do anything until they see the whites of the eyes of inflation. Higher rates may be put off into the distance."

Not all reports this week were negative. Industrial production increased 0.3% in December for a 2013 total of 3.7%. The 2013 increase brought the indicator to 0.9% over its pre-recession peak, a sign that economic recovery is occurring, just not as robustly as hoped.

The 10-year Treasury note yield finished the week of 1/13 at 2.83% while the 30-year Treasury note yield finished the week at 3.76%.

Interest Rates Fall on Faltering Economy

Freddie Mac released the results of its weekly Primary Mortgage Market Survey on Thursday, January 16. The results show average fixed mortgage rates falling this week after an incredibly weak jobs report last Friday, January 10.

This week, the 15-year fixed rate mortgage averaged 3.45%. This represents a decrease from last week when it averaged 3.56%. One year ago, the 15-year fixed rate mortgage averaged 2.66%.

The 30-year fixed rate mortgage averaged 4.41% this week, a decrease from last week when it averaged 4.51%. Last year at this time, the 30-year fixed rate mortgage averaged 3.38%.

"Mortgage rates drifted downward this week amid signs of a weakening economic recovery," said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. "The economy added 74,000 jobs in December, less than the market consensus forecast. Retail sales rose 0.2% in December, which was nearly half of November's 0.4% increase. Meanwhile, the unemployment rate fell to 6.7% which was the lowest since October 2008."

The money market fund finished the week of 1/13 at 0.4%. The 1-year CD finished at 0.7%.

Published January 17, 2014

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