Bonds/Economy

The Week Ahead: Home Depot, Campbell's Soup, FOMC

twocents@thestreet.com (Lindsey Bell and Andrew Krill) — Fri, 17 May 2013 22:52 GMT

<I>The Street's</I> Lindsey Bell and Andrew Krill discuss what stocks they are trading and looking at next week.

Big Banks: Friday Financial Winners

twocents@thestreet.com (Philip van Doorn) — Fri, 17 May 2013 20:26 GMT

NEW YORK (TheStreet) -- The nation's largest banks again led the way on Friday, as the broad indices pushed to record highs.

Dow Jones Industrial Average rose 1% to end at a new closing high of 15,354.40, while the S&P 500 was also up 1%%, ending the session at a record closing high of 1,666.12.

The KBW Bank Index was up 2% to close at 61.13, with all 24 index components showing gains. ...

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3 'Tweaks' to Fortify Your ETF Portfolio

twocents@thestreet.com (Gary Gordon) — Fri, 17 May 2013 20:16 GMT

NEW YORK (ETF Expert) -- Extraordinary rallies off bear market bottoms are typical. Bullish run-ups in March 2003 and March 2009 registered enviable unrealized gains of 35% and 65% respectively; each advance experienced little resistance for roughly nine to 10 months.

Powerful moves off minor corrections are less typical, if not downright suspicious. Since mid-November, investors in the S&P 500 SPDR Trust have witnessed a soothing 22% ride to all-time highs.

In the last quarter century, you could probably count the number of times on your hand when U.S. stocks traveled a similar vertical trajectory for more than a half year without a significant hitch or pullback. ...

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Brown: Risk Weighting Has Place

twocents@thestreet.com (Joe Deaux) — Fri, 17 May 2013 18:45 GMT

Senator Sherrod Brown discusses risk weighting and housing in his "Too Big to Fail" bill with TheStreet's Joe Deaux

A Tumblr Takeover? Facebook Marks One Year Anniversary.

twocents@thestreet.com (TheStreet Staff) — Fri, 17 May 2013 15:00 GMT

Rampant rumors are circulating that Yahoo may be looking to snap up social blogging site, Tumblr. Meanwhile Facebook marks its first anniversary as a publicly traded company. Shares are still off their $38 IPO price.

5 Traits of Our Unbanked and Underbanked

twocents@thestreet.com (Brian O'Connell) — Fri, 17 May 2013 15:00 GMT

NEW YORK (TheStreet) -- There are approximately 51 million unbanked or underbanked U.S. consumers in the country, but they may not be what or who you think. In fact, you may know one in your neighborhood, or even in your own household.

FactorTrust, an Atlanta-based financial services analytical firm, wants to highlight the problem. The firm is introducing a quarterly index that tracks the underbanked, with the idea that financial services firms should reach out to this demographic and help them organize their money. Also see: 3 Alternatives for People Sick of Banks

"Our goal in launching this quarterly index is to share the knowledge we've been able to mine from our database of millions of records related to underbanked consumers," says Greg Rable, CEO of FactorTrust. "We want to empower lenders to reach these consumers effectively as well as educate a broader audience about who these consumers are, and to show how valuable they could be to financial services decision-makers." ...

Global Macro: U.S. Inflation Remains Suppressed

twocents@thestreet.com (Andrew Sachais) — Fri, 17 May 2013 10:00 GMT

NEW YORK (TheStreet) -- U.S. inflation data underperformed expectations on Thursday, providing reassurance that the Federal Reserve's stimulus efforts were far from over. The chart below shows a month over month change in CPI inflation readings, which look to be trending slightly lower. The blue line represents the actual month over month movements and the red line shows a smoothed four-month moving average. The moving average signals that although stimulus efforts have been greatly increased in 2013, U.S. inflation continues to trend lower. Weak inflation and high, albeit improving, unemployment figures show that the recovery remains gradual. Monetary policy has remained simulative, but fiscal policy has proven to be counter-growth. January saw the implementation of tax hikes and March brought with it budget cuts, better known as the federal sequestration. As a testament to the level of pain fiscal policy is bringing to the economy, Wal-Mart reported that same-store sales for the first quarter were weaker as the consumer was hurt by such fiscal policy restraints. Similarly, factory activity has been hindered by government austerity, as seen in data releases that missed expectations for the Empire State regional manufacturing activity and industrial production on Wednesday. Monetary policy is aiming to counteract fiscal austerity. Until both act in an expansionary manner, economic weakness looks to persist.

The chart below is of DB USD Index Bullish over an equal-weight DB Commodity Index Tracking Fund. This pair aims to show how financial markets are reacting to tepid inflation outlooks. Inflation has proven weak in both Europe and the United States over the past quarter, which has damped demand for commodities. Weakness in commodities and the absence of price pressure in the U.S. has led to a stronger dollar. Although economic data is not impressive in the U.S., monetary easing in other countries has kept the dollar at elevated levels. As long as inflation remains weak and other countries continue to devalue their currencies, commodities should underperform the dollar.

The last pair is of Barclays TIPS Bond Fund over Barclays 7-10 Year Treasury Bond Fund. This is another inflation indicator, within financial markets, signaling that expectations remain suppressed. CPI readings have failed to reach the 2% year over year Federal Reserve mandate, which has brought the pair below, down to yearly support zones. Investors do not see the need for inflation protected securities because they do not fear inflation. Although monetary policy remains accommodative, and in the future rates have nowhere to go but up, investors do not see rates moving in the near term. Contrary to Japan, where there is an increased fear of rising rates, the U.S. government has not done enough to coordinate both monetary and fiscal policy that leads to GDP expansion. However, financial markets are signaling that they will continue to bid equities higher, even in the face of gradual economic improvement. ...

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JCPenney Reports Loss, Tumbles After-Market

twocents@thestreet.com (Laurie Kulikowski) — Thu, 16 May 2013 21:51 GMT

NEW YORK (TheStreet) - JC Penney was falling in after-hours trading Thursday after reporting a first-quarter loss of $348 million, or $1.58 per share.

Net loss for the quarter totaled $289 million, or $1.31 a share when adjusted for charges related to the retailer's restructuring and management transition. Plano, Texas-based JC Penney said restructuring charges were $72 million.

The stock was tumbling 2.9% in after-hours trading after closing at $18.79. ...

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Regions Financial: Bank Stock Loser

twocents@thestreet.com (Philip van Doorn) — Thu, 16 May 2013 20:31 GMT

NEW YORK (TheStreet) -- Regions Financial was the loser among the largest financial names on Thursday, with shares sliding more than 2% to close at $8.95.

The broad indices ended lower and the KBW Bank Index was down 1% to close at 60.16, following a mostly disappointing batch of economic reports:

The Department of Labor reported that initial unemployment claims for the week ended May 11 increased by 32,000 to 360,000, while the four-week moving average for jobless claims increased by 1,250 to 339,250, from the previous week's revised figure of 338,000. ...

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U.S. Demand Is Alive and Well

twocents@thestreet.com (Fisher Investments) — Thu, 16 May 2013 17:14 GMT

NEW YORK (TheStreet) -- To many observers, March's U.S. trade report was a smashing success: Compared to March 2012, the trade deficit fell 11%!

To us, though, that wasn't necessarily cause for celebration. In our view, the trade deficit is a misleading metric. It counts imports as a negative, but high and rising imports are a sign of healthy domestic demand -- a good thing.

We think total trade (imports plus exports) is a better gauge of U.S. economic health, and March's report showed a 2% month-over-month drop, with exports falling 0.9% and imports falling 2.8%. Year over year, imports were down 5.6%, and first-quarter imports were a hair behind the first quarter of 2012. ...

Berkshire Is an Insurance Company, Not a Nation-State: S&P

twocents@thestreet.com (Antoine Gara) — Thu, 16 May 2013 16:33 GMT

NEW YORK (TheStreet) -- Berkshire Hathaway is an insurance company and not a nation-state, according to rating agency Standard & Poor's, which cut the conglomerate's credit rating a notch below the AA+ grade it currently gives the U.S. government.

Warren Buffett-run Berkshire, with its subsidiaries spanning insurance, transportation, energy, housing and investments, has often been characterized as a mini-United States and a reflection of the country's economic prospects.

In a Thursday downgrade, S&P, however, sees the bulk of Berkshire's cash flow coming from its sprawling insurance operations and accordingly has cut the conglomerate's credit rating a notch below the government's to AA. ...

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Housing Momentum Good to 2017: CoreLogic Case-Shiller

twocents@thestreet.com (Shanthi Bharatwaj) — Thu, 16 May 2013 14:53 GMT

NEW YORK (TheStreet) -- Forget all the talk of a housing bubble. The recovery has plenty of momentum behind it, according to CoreLogic.

Home prices rose 7.3% in 2012, the most in seven years, according to the CoreLogic Case-Shiller Home Price Index. Prices are set to rise further in 2013 and beyond. Economists expect the index to rise at an annual rate of 3.9% between the fourth quarter of 2012 and the fourth quarter of 2017.

The rate of appreciation will be clearly slower than 2012. Home prices are projected to rise only 2.5% in 2013. This is decidedly lower than some forecasts that call for a 7% to 8% rise in 2013. ...

Walmart Misses, Kohl's Beats, Stocks React

twocents@thestreet.com (Laurie Kulikowski) — Thu, 16 May 2013 14:52 GMT

New information has been added to this story.

NEW YORK (TheStreet) - The stocks of two big department stores, Wal-Mart Stores and Kohl's performed vastly different on Thursday, despite both retailers reporting earnings results that missed revenue expectations.

Shares of Wal-Mart, the world's largest retailer, stumbled after it reported that sales in its U.S. stores fell, even with a more positive outlook for the second quarter. The stock was trading down 2.1% to $78.20 in trading Thursday. ...

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How to Make Your Real Estate Make Sense

twocents@thestreet.com (Jeff Brown) — Thu, 16 May 2013 14:00 GMT

NEW YORK (BankingMyWay) -- A house is a home. No, it's an investment. OK, then, it's both.

And that's problem -- a muddled view that can be used to rationalize an unsuitable property. If the home's too expensive, we figure, well, it's a good investment. And if the value isn't rising as we'd hoped, we say, well, it's a good home. In fact, the property may not be serving either purpose as well as it should.

Disentangling these two functions is key to making the homeownership decision more rational. That's becoming more important as some experts warn about a new housing bubble, at least in some parts of the country. ...

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Big Bank Phobia: Not Too Big to Fail

twocents@thestreet.com (Philip van Doorn) — Thu, 16 May 2013 12:22 GMT

This is the first of a three-part series rebutting the three most popular approaches toward lowering the systemic risk of large U.S. banks. Please click here to read part two.

NEW YORK (TheStreet) -- There are three main approaches being taken by the enemies of large U.S. banks, and all of them are bad ideas.

Five years after the peak of the credit crisis, nearly three years after the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed, and more than two years since the last "final disposition" of government bailouts for the "big six" U.S. banks, it remains quite stylish for members of both political parties to continually bash the large banks, saying they represent a continued threat to the U.S. taxpayer. ...

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Citigroup: Financial Winner

twocents@thestreet.com (Philip van Doorn) — Wed, 15 May 2013 20:41 GMT

NEW YORK (TheStreet) -- Citigroup was the winner among the largest financial names on Wednesday, with shares rising 2.5% to close at $51.34.

Bank stocks led the market again, as the KBW Bank Index rose over 1% to close at 60.51, with all but one of the 24 index components ending the session with gains

The Dow Jones Industrial Average S&P 500 each pushed further into record territory, after stronger-than-expected housing numbers offset a disappointing report on manufacturing activity. ...

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Macy's Shares Surge on Earnings Beat

twocents@thestreet.com (Laurie Kulikowski) — Wed, 15 May 2013 15:06 GMT

NEW YORK (TheStreet) -- Macy's shares were rising Wednesday on strong volume after the department store kicked off first-quarter earnings reports with better-than-expected earnings and announced a dividend increase.

The Cincinnati-based company said net income was $217 million for the 13-week quarter, or 55 cents per diluted share versus $181 million, or 43 cents in the same period last year. Analysts on average expected Macy's to post quarterly earnings of 53 cents a share.

First-quarter sales for the period totaled $6.39 billion, up 4% from the same period last year. Comparable stores sales, which includes stores open at least one year as well as e-commerce sales form Macys.com and Bloomingdales.com, rose by 3.8% from the first quarter last year, Macy's said. ...

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Fannie Mae, Freddie Mac Help Uncle Sam Shrink Deficit: CBO

twocents@thestreet.com (Shanthi Bharatwaj) — Wed, 15 May 2013 14:23 GMT

NEW YORK (TheStreet) -- The U.S. budget deficit in 2013 is projected to shrink faster than earlier thought, thanks in large part to the government's new cash cows, bailed-out housing giants Fannie Mae and Freddie Mac.

The Congressional Budget Office on Tuesday said the budget deficit will shrink this year to $642 billion , the smallest shortfall since 2008. The projection was $203 billion smaller than the $845 billion shortfall forecast by CBO in February.

The budget agency said the decline in the projected deficit for 2013 "stems largely from a boost in in estimated revenues as well as from expected payments to the Treasury by Fannie Mae and Freddie Mac." Also see: Fannie Mae is a Government Cash machine >> ...

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Retail Picture Brighter Than Expected 

twocents@thestreet.com (Brian O'Connell) — Wed, 15 May 2013 13:00 GMT

NEW YORK (TheStreet) -- The U.S retail economy may be poised for a bounce back.

The latest MarketPulse survey from Chicago-based Information Resources tells the tale: U.S. consumers feel significantly better in the first quarter of 2013 than they did the last quarter of 2012.

"Consumers were feeling a bit of the gloom and doom as 2012 came to a close, because they simply didn't know what to expect on the financial front for the new year," says Susan Viamari, an IRI analyst. "With a looming debt ceiling crisis and expiration of the 2% payroll tax cut, they were preparing for another bumpy ride." ...

Europe's Permanent Recession

twocents@thestreet.com (Peter Morici) — Wed, 15 May 2013 11:38 GMT

NEW YORK (TheStreet) -- On May 6, I wrote Europe was in danger of falling into a permanent recession -- a depression.

Now, the European statistical agencies report France joined Italy and Spain's recessions during the first quarter, and economic activity across the entire Eurozone continued to contract.

The straight jacket imposed by Euro-think -- allegiance to a failed experiment in a common currency, ill-conceived and overzealous austerity measures, and halting and inadequate labor market reforms -- caused continued economic contraction across the entire Eurozone. ...

Bank Stocks Lead Bulls: Financial Winners

twocents@thestreet.com (Philip van Doorn) — Tue, 14 May 2013 21:17 GMT

Updated from 4:22 p.m. ET with comments from Guggenheim analyst Marty Mosby.

NEW YORK (TheStreet) -- Bank of New York Mellon was the winner among the largest financial names on Tuesday, with shares rising 4% to close at $32.26.

The broad indices all ended with 1% gains, as the Dow Jones Industrial Average and S&P 500 pass intraday record highs. Financial stocks led the way, with the KBW Bank Index rising 2% to close at 59.85, with all 24 index components ending the session with gains. ...

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Student Debt Continues to Rocket: NY Fed

twocents@thestreet.com (Shanthi Bharatwaj) — Tue, 14 May 2013 15:58 GMT

NEW YORK (TheStreet) -- Student debt continues to climb, even as other forms of consumer debt decline, according to the latest quarterly report on household debt published by the New York Federal Reserve.

Student loans grew by $20 billion during the first quarter to a total of $986 billion as of March 31, 2013. This has been the only category of household debt to grow during the great recession and is now the biggest form of household debt next to mortgages.

The delinquency rate on student loans -- the proportion of student loans that are more than 90 days behind on their payment -- declined to 11.2% in the first quarter from 11.7% in the fourth quarter. But this figure understates the number of problem student loans as nearly half the loans are currently in grace periods or deferment or forbearance. ...

Schwab: Junk Frothy, Munis Cheap

twocents@thestreet.com (Gregg Greenberg) — Tue, 14 May 2013 14:45 GMT

Schwab Fixed Income Strategist Kathy Jones says high yield bonds are expensive but munis remain cheap despite problems in a few states.

In South Texas the Recovery Is a Boom

twocents@thestreet.com (Dana Blankenhorn) — Tue, 14 May 2013 14:43 GMT

NEW YORK (TheStreet) -- We drove to South Texas last weekend for my daughter's college graduation, and from the highway the place looked much like it did when I graduated from college, in 1977.

Then, as now, an oil boom was in process.

All along I-37 and U.S. 281, from Kingsville to San Antonio, I saw oil wells being drilled deep into the Eagle Ford shale, the biggest new oil play the state has seen in decades. ...

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Cullen/Frost Has Earned Its Premium, and More

twocents@thestreet.com (Philip van Doorn) — Tue, 14 May 2013 14:23 GMT

NEW YORK (TheStreet) -- On the surface, the stock of Cullen/Frost Bankers looks expensive, but the San Antonio lender appears primed for strong loan growth in its home state of Texas.

Cullen/Frost's shares closed at $62.53 Monday. The shares trade for 15.7 times the consensus 2014 earnings estimate of $3.98, among analysts polled by Thomson Reuters. That is the highest forward price-to-earnings ratio among the 24 components of the KBW Bank Index .

That forward P/E ratio looks especially high when compared to the largest U.S. banks, but the premium is justified because of Cullen/Frost's amazingly consistent long-term track record for strong earnings, and because of the bank's growing commercial loan pipeline. ...

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No Housing Bubble Here: Trulia

twocents@thestreet.com (Shanthi Bharatwaj) — Tue, 14 May 2013 13:50 GMT

NEW YORK (TheStreet) -- National home prices are still undervalued relative to their fundamental value, Trulia economist Jed Kolko noted in a blog post Tuesday, soothing concerns the market is heading into bubble territory.

While price gains in some markets are starting to rival those bubble years, this is still more reflective of a "rebound" from the bottom, according to Kolko.

"Bubbles are notoriously difficult to predict and hard to confirm until after they've burst: it's impossible to be sure whether price gains are justified by fundamentals until, if and when, a bubble bursts," Kolko wrote. "San Francisco home prices, for instance, are the highest in the country; is that "irrational exuberance" by speculative homebuyers, or are those prices justified by strong job growth, high incomes, great weather, and constraints on the local housing supply?" ...

Trust and Custody Banks: Financial Winners

twocents@thestreet.com (Philip van Doorn) — Mon, 13 May 2013 20:41 GMT

NEW YORK (TheStreet) -- Trust and custody banks were the winners among the nation's largest financial names on Monday.

Shares of State Street of Boston were up over 2% to close at $61.67, while Bank of New York Mellon was up nearly 2% to close at $28.82 and Northern Trust of Chicago was up over 1% to close at $55.11.

The broad indices ended mixed, after the Census Bureau reported Monday that retail sales rose 0.1% in April after falling by a revised 0.5% in March. The consensus estimate among economists polled by Thomson Reuters was for retail sales to fall 0.3% in April. ...

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Day of Reckoning Looms

twocents@thestreet.com (Sham Gad) — Mon, 13 May 2013 19:30 GMT

Editor's Note: This article was originally published on Real Money at 12 p.m. EDT on May 13. To see latest Real Money commentary as it's published, sign up for a free trial of Real Money.

NEW YORK (Real Money) -- How long will stocks keep climbing? Or, put another way, when will the party end? The elephant in the room is the Federal Reserve and when it will decide to stop injecting money into the system. When the Fed stops making asset purchases, it will be a move heard around the world.

Rest assured that by the time the Fed actually announces it is done buying, Mr. Market will probably have already started taking some chips off the table. We can focus on the Fed's meeting minutes for clues, but the only thing we know for sure is that each passing day brings us one day closer to that day of reckoning. ...

Retail Stocks Mixed Despite Better-than-Expected April Sales (Update 1)

twocents@thestreet.com (Laurie Kulikowski) — Mon, 13 May 2013 16:28 GMT

New information has been added to the story.

NEW YORK (TheStreet) - Retail stocks were mixed on Monday, despite a positive report from the government on April retail sales.

U.S. food and retail sales rose 0.1% in April compared to March, to $419 billion, according to the latest Commerce Department figures released on Monday. Economists were expecting sales for the retail sector to fall 0.3% for the month of March, according to Thomson Reuters. ...

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Senators Try to Gum Up Dodd-Frank (Update 1)

twocents@thestreet.com (Philip van Doorn) — Fri, 26 Apr 2013 10:45 GMT

Updated from 6:45 a.m. ET with comment from ConnectOne Bancorp CEO Frank Sorrentino III.

NEW YORK (TheStreet) -- Senators Sherrod Brown (D., Ohio) and David Vitter (R., La.) may see individual political benefits from their proposed capital rules for U.S. banks, but their bill repeats many elements already included in previous legislation, while taking an infantile stance against the risk-weighting of banks' assets.

The senators on Wednesday proposed the Terminating Bailouts for Taxpayer Fairness Act, which would require "megabanks" with total assets of over $500 billion to raise capital levels to at least 15% of total assets. Under the proposal, "mid-sized and regional banks would be required to hold eight percent in capital to cover their assets." ...

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