U.S. Producer Prices Drop 0.1%; Goldman Sachs Net Falls 58%

Arthi Gupta
18 Jan, 2012
New York City

The U.S. indexes gained after Goldman Sachs quarterly profit exceeded estimates. U.S. mortgage applications soared 23% last week and producer prices declined 0.1% in December. Jerry Yang, co-founder of Yahoo resigned from its board.

[R]9:50 AM New York – The U.S. indexes gained after Goldman Sachs quarterly profit exceeded estimates. U.S. mortgage applications soared 23% last week and producer prices declined 0.1% in December. Jerry Yang, co-founder of Yahoo resigned from its board.[/R]

U.S. indexes gained after Goldman Sachs reported higher than expected earnings and mortgage activity in the U.S. surged last week on refinancing but producer prices dropped.

European markets traded higher on the hopes that the International Monetary Fund will boost its lending resources by $1 trillion and German yields fell in an auction of two-year notes today.

However, traders were cautious after the World Bank and the International Energy Agency lowered global economic outlook and oil demand growth forecast for the year.

Greece and its bondholders remain at odds in restructuring debt ahead of the resumption of talks today. Greece is looking to cut its total debt load by $130 billion from the $450 billion before the nation can access more loans from euro zone bailout fund.

The International Monetary Fund is planning to boost its lending resources by $1 trillion to shield the global economy against any major fallout from the European debt crisis, Bloomberg News reported on Wednesday, citing an unnamed official from a Group of 20 nations.

Asian markets traded mixed tracking developments in Europe.

However, foreign direct investment in China increased 9.7% in 2011 to a record $116 billion, data from the Commerce Ministry showed today. In 2010, foreign direct investment increased 17.4%.

U.S. Mortgage Applications Soar

The Mortgage Bankers Association''s seasonally adjusted index of mortgage application activity for the U.S., which includes both refinancing and home purchase demand, soared 23.1% in the week ended January 13 following an increase of 4.5% the week before.

The MBA''s seasonally adjusted index of refinancing applications surged 26.4% and loan demand for home purchases gained 10.3%.

Fixed 30-year mortgage rates averaged 4.06%, down from 4.11%.

U.S. Producer Prices Drop

U.S. producer price index for finished goods fell 0.1% for December on a seasonally adjusted basis, according to data released by the U.S. Department of Labor today, driven by a drop in costs of foods and energy, both of which indexes fell 0.8%.

World Bank Lowers Outlook

The World Bank on Wednesday slashed its outlook for the global economy. The lender now estimates the global economy to grow 2.5% in 2012, down from the June prediction of 3.6%, according to the latest edition of the Global Economic Prospects 2012.

The U.S. outlook was cut to an expansion of 2.2% this year from 2.9%.

IEA Cuts Oil Demand Growth Forecast

The International Energy Agency lowered global oil product demand growth from the earlier 1.3 million barrels per day to 1.1 mbd for 2012.

The agency said that OPEC crude supply in December rose 240,000 barrels per day to 30.89 mbd, the highest level in more than three years.

Jerry Yang Resigns

Yahoo! Inc. said on Tuesday that co-founder and former chief executive officer Jerry Yang resigned from its board of directors and all other positions with the company.

Earnings Review

Goldman Sachs Group, Inc. ((GS)), the bank and financial holding company reported fourth quarter net revenues, including net interest income, dropped 30% to $6.05 billion from $8.64 billion in the year-ago period. Net earnings in the quarter plunged 58% to $1.01 billion, or $1.84 a share compared to net earnings of $2.39 billion, or $3.79, in the same period a year earlier,

For fiscal year 2011, the company reported net earnings of $2.51 billion or $4.51 per share, down from $7.71 billion or $13.18 per share in the previous year. Net revenues declined 26% to $28.81 billion from $39.16 billion last year.

State Street Corporation ((STT)), the financial holding company reported fourth quarter revenue rose 13.3% to $2.32 billion, from $2.043 billion in the fourth quarter of 2010. Net income in the quarter soared 359% to $381 million or 76 cents per diluted share compared to net income of $83 million or 16 cents per share in the same quarter last year.

The Bank of New York Mellon Corporation ((BK)), the financial services company reported fourth quarter total revenue dropped 5.6% to $3.54 billion from $3.75 billion. Net income in the quarter fell 25.6% to $505 million or 42 cents per diluted share compared to net income of $679 million or 54 cents per share last year.

The Charles Schwab Corporation ((SCHW)), the savings and loan holding company reported fourth quarter total net revenues dipped 2% to $1.11 billion versus $1.13 billion last year. Net income in the quarter rose 37% to $163 million or 13 cents per diluted share compared to net income of $119 million or 10 cents per share for the year-earlier period.