U.S. Indexes Struggle, Wells Fargo and Banks in Focus

Nichole Harper
11 Jan, 2013
New York City

U.S. indexes rebounded from the low in the first hour of trading and banks struggled. Wells Fargo reported 24% increase in earnings supported mortgage loans business but net interest margin suffered. Boeing declined after two more flights in Japan report problems.

[R]1:05 PM New York – U.S. indexes rebounded from the low in the first hour of trading and banks struggled. Wells Fargo reported 24% increase in earnings supported mortgage loans business but net interest margin suffered. Boeing declined after two more flights in Japan report problems.[/R]

Stocks rebounded in early afternoon trading after indexes dropped as much as 0.3% in the first hour of trading.

Banks were under pressure after Wells Fargo reported 24% jump in the latest quarterly earnings but said net interest margins were under pressure. Other large banks are scheduled to report earnings in the next week.

U.S. Trade Deficit Widens

U.S. trade deficit unexpectedly widened in November on higher than expected demand for automobiles and retailers stocking up ahead of holiday sales.

Trade deficit increased 15.8% to $48.7 billion, the largest since the deficit in April and fro $42.1 billion in October.

Exports increased 1% in November to $182.6 billion and imports gained 3.8% to $231.3 billion. Auto parts imports jumped $1.51 billion and demand for mobile phones increased by $1.81 billion.

European markers traded sideways and Italy successfully completed 3.5 billion euros of bond auction at a lower yield of 1.85%.

Nikkei index in Japan closed sharply higher and extended gains to 25% in the last two months and closed up for the ninth week in a row, the longest rally 25 years.

Prime Minister Shinzo Abe announced stimulus measures of $115 billion and said he will demand more action from the central bank and increase inflation target to 2% and ask the bank to place maximizing employment on top of the agenda.

Stocks in Review

The Boeing Company ((BA)) declined 2.4% or $1.92 to $75.17 after two separate flights in Japan reported oil leak and cracked cockpit window adding to the safety concerns for its new 787 Dreamliner. The U.S. Department Transportation said that the new jumbo jet would be subject to a review.

Best Buy ((BBY)) gained 12% or $1.55 to $13.75 after the latest quarterly results were ahead of expectations and same store sales in the quarter were flat.

KBR, Inc. ((KBR)) declined 6.1% or $1.96 to $30.04 after the oil and construction industries service provider lowered its fiscal 2012 earnings per diluted share guidance to a range $1.95 of $2.10 from the earlier guidance of between $2.60 and $2.80.

Infosys Ltd surged 17% to $51.49 in New York trading after the software outsourcing company reported flat quarterly earnings but raised sales outlook for the current year.

Wells Fargo & Company ((WFC)) dropped 1.6% or 60 cents to $34.80 the holding company reported total revenue in the fourth quarter ending in December jumped 7% to $21.9 billion from $20.6 billion in the same period of last year. Net income in the quarter surged 24% to $5.1 billion or 91 cents per diluted share compared to $4.1 billion or 73 cents a share a year ago.

The fourth largest bank also said its net interest margin declined in the quarter despite the profit jumped 24%. The bank also made fewer loans than in the third quarter.

For the year, total revenue increased 6% to $86.1 billion from $80.9 billion a year ago. Net income for the year jumped 19% to $18.9 billion or $3.36 per diluted share from $15.9 billion or $2.82 per share in the prior year.