U.S. Indexes Rise on Economic Data; BofA Swings to Profit

Arthi Gupta
19 Jan, 2012
New York City

The U.S. indexes traded higher on upbeat economic data but housing starts fell to annual rate of 657,000 and consumer prices remained unchanged in December. Weekly jobless claims fell to 352,000. Morgan Stanley swung to loss.

[R]10:05 AM New York – The U.S. indexes traded higher on upbeat economic data but housing starts fell to annual rate of 657,000 and consumer prices remained unchanged in December. Weekly jobless claims fell to 352,000. Morgan Stanley swung to loss.[/R]

U.S. indexes traded higher after weekly jobless claims and housing starts fell more than anticipated while consumer prices remained unchanged.

Financial stocks gained after Bank of America swung to profit.

European markets advanced after successful debt sale by Spain and France. Traders are optimistic on the outcome as the Greek government heads into a second day of talks with private creditors on a crucial bond swap deal.

However, Greek talks may be tense till the last minute as private lenders and hedge funds drive a hard bargain. Greece is expected to lower its debt by €100 billion in the next three years and exchange a new security that pays less than 4% interest rate.

Even after the debt restructuring, Greece is expected to struggle until the end of the decade and debt as a percentage of GDP is estimated to decline 120% of GDP from the current 140%.

Fitch credit opinion agency may downgrade six euro area countries by one or two levels by the end of this month, managing director Edward Parker said on Wednesday.

Spain raised €6.61 billion from the sale of its bonds maturing in 2016, 2019 and 2022 on Thursday, far exceeding the maximum target of €4.5 billion set for the auction, reports said.

France borrowing costs declined at an auction of medium term debt maturing through 2016 today.

Asian markets rallied tracking developments in the U.S. and Europe.

U.S. Housing Starts Drop

U.S. housing starts fell more than estimated in December, according to data released by the U.S. Commerce Department today.

New homes starts fell off to a seasonally adjusted annual rate of 657,000 in December, 4.1% below the November level.

U.S. Weekly Jobless Claims Decline

First-time claims for U.S. employment benefits dropped more than anticipated in the week ended January 14, according to a report released by the U.S. Labor Department today.

The report showed that weekly jobless claims fell to 352,000 from the previous week''s revised figure of 402,000.

U.S. Consumer Prices Flat

U.S. consumer prices remained unchanged for the second consecutive month in December, according to the U.S. Labor Department report released today.

Excluding food and energy prices, consumer prices rose 0.1% in December.

Kodak Files for Bankruptcy

Eastman Kodak Co. filed for bankruptcy protection for business reorganization. The struggling camera maker obtained $950 million from Citigroup Inc. and expects to emerge from the restructuring in 2013 as a digital imaging and materials science company.

The 131-year-old company has been struggling to sell its non-core assets to stay afloat and to transform itself into a digital company.

Earnings Review

Bank of America Corp. ((BAC)), the banking and financial services corporation reported fourth quarter revenue, net of interest expense, on a fully taxable-equivalent basis rose 11% to $25.1 billion. Net income in the quarter was $2.0 billion, or 15 cents per diluted share compared with a net loss of $1.2 billion, or 16 cents per diluted share in the year-ago period.

For the full year, the company reported net income of $1.4 billion, or 1 cent a diluted share compared with a net loss of $2.2 billion, or 37 cents a diluted share in 2010. Revenue, net of interest expense, on an FTE basis declined 15% to $94.4 billion.

eBay Inc. ((EBAY)), the online auctioneer said fourth quarter net revenue rose 35% to $3.38 billion from $2.50 billion in the same quarter last year. Net income in the quarter surged 254% to $1.98 billion or $1.51 per diluted share compared to net income of $559.2 million or 42 cents per share for the year-ago quarter.

For the full year, revenue increased 27% to $11.7 billion compared to $9.16 billion in 2010. Net income for the year soared 79% to $3.2 billion or $2.46 per diluted share versus net income of $1.80 billion, or $1.36 per share in the prior year.

Morgan Stanley ((MS)) reported fourth quarter net revenues dropped 26% to $5.71 billion from $7.74 billion in the prior year quarter. Net loss in the quarter was $275 million or 15 cents per diluted share compared to net income of $600 million or 41 cents per share in the fourth quarter of 2010.

Sony Ericsson Mobile Communications AB, the mobile phone maker reported fourth quarter sales dropped 16% to €1.29 billion from €1.53 billion. Net loss for the quarter was €207 million compared to a profit of €8 million last year.