What’s The Story Morning Glory?

by CC January 17, 2012 9:26 am • Commentary


Manufacturing in the New York region expanded in January at the fastest pace in nine months, reflecting improving orders, sales and employment.

The Federal Reserve Bank of New York’s general economic index rose to 13.5, the highest level since April, from a revised 8.2 in December. That gauge exceeded the median forecast of 56 economists surveyed by Bloomberg News, which projected an increase to 11. Readings higher than zero signal expansion among companies in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.

Factories may keep driving the economic expansion as they maintain production to meet household and business demand. At the same time, the financial crisis in Europe and a weaker euro may slow purchases of American-made goods.


Consumer prices in the euro zone fell more than previously expected in December, the start of a retreat from a November peak that should give the European Central Bank more room to cut interest rates as the economy heads for recession.

Inflation in the 17 countries sharing the euro was 2.7 percent in December on an annual basis, revised down from an earlier estimate of 2.8 percent for the month, the European Union’s statistics office Eurostat said.


Citigroup Inc. (C), the third-biggest U.S. bank by assets, said fourth-quarter profit dropped 11 percent, missing analysts’ estimates for an increase, as revenue from stock and bond trading declined.

Net income fell to $1.17 billion, or 38 cents a share, from $1.31 billion, or 43 cents, a year earlier, the New York-based company said today in a statement. Profit adjusted for one-time items was expected to be 51 cents a share, the average estimate of 22 analysts in a Bloomberg survey.


Wells Fargo & Co. grew fourth-quarter earnings by 20% as the banking giant posted more loan growth and again reduced the amount of money it sets aside to cover potential loan losses.

The San Francisco WFC +1.18%  , the nation’s fourth-biggest by assets, posted strong business loan growth from the prior year, and managed to top Wall Street’s expectations for profits and revenue because it reduced both its lending costs and operating costs. The bank’s lower lending costs marked a recovery from the third-quarter when it missed profit expectations, its first miss in more than two years, because soaring deposits wiped out loan growth.

The bank’s focus on lending over capital markets has kept it apart from the other giant U.S. banks in the second half of the year, as rival Citigroup Inc. C -4.88%  reported below expectations Tuesday because of the weak global markets.

Wells Fargo reported a profit of $4.11 billion, or 73 cents a share, up from $3.41 billion, or 61 cents a share, a year earlier and topping the 72 cents analysts polled by Thomson Reuters expected.

Revenue slipped 4.1% to $20.6 billion, but still bested the $20.08 billion Wall Street forecast.

Loans at the bank were up 2% from the prior year, with the biggest lending coming from its commercial lending operations. Commercial and industrial loans rose 11%, while commercial real-estate lending rose 6.6%, both positive signs for U.S. businesses.

Consumer loans slipped slightly from the prior year as real-estate balances continue to decline, but credit-card loans rose.

The bank’s net interest margin, the profitability measure in the lending operations, fell to 3.89% from 4.16% in the prior year as interest rates continued to fall throughout 2011.


Investors aren’t acting kindly in their first crack at trading following the weekend capsizing of a Carnival cruise ship off Italy. Carnival’s shares tumbled 18% premarket to $28.26 — right near its two-year low set in October — while peer Royal Caribbean is off 8.1% at $26.41. Both cruise operators get downgraded to neutral by Susquehanna, which cuts estimates on the companies and slashes its stock-price targets by nearly one-third amid expectations of lower yields this year. Timing of the incident couldn’t have been worse, it notes, as now is the start of the so-called wave season, when many travelers book cruise plans for the year. Citigroup lowered its price targets much less that Susquehanna and stays at buy on both companies.

Eastman Kodak Co. filed a patent-infringement lawsuit Friday against rival Fujifilm Corp. (4901.TO), the latest effort by the struggling U.S. imaging company to monetize its intellectual-property portfolio. Kodak’s shares rose 18% to 61 cents in recent premarket trading.

Walter Energy Inc. tempered its fourth-quarter earnings guidance and lowered its estimate of output for the year, pointing to production problems in Alabama and weak results from some new startup projects. Shares fell 2.5% to $57.30 in recent premarket trading.

Medivation Inc. reported its investigational drug dimebon failed to meet co-primary endpoints for cognition or daily function in the treatment of Alzheimer’s disease in a Phase 3 trial undertaken with partner Pfizer Inc. Shares of Medivation fell 3.1% to $53.98 in recent premarket trade as the two companies said they would discontinue development of dimebon for all indications.

Take-Two Interactive Software Inc. warned it expects a loss for fiscal 2012 as it has to delay the launch of its “Max Payne 3″ videogame to May from March. Shares slipped 3.5% to $14 premarket.

Blackbaud Inc. said it plans to acquire Convio Inc. for roughly $312.1 million, a deal it said will allow the two providers of software to nonprofit organizations to combine their strengths. Under the proposed deal, Blackbaud is offering Convio shareholders $16 a share, a 49% premium to its Friday closing price and well above its all-time closing high of $12.24. Convio’s shares surged 48% to $15.90 in premarket trade.

Venoco Inc. said it agreed to be taken over by its chief executive and majority shareholder in a deal valuing the oil-and-gas exploration company at roughly $735 million. Shares rose 54% to $11.82 premarket on Chairman and Chief Executive Timothy M. Marquez’s offer to buy all company shares he doesn’t already control at $12.50 in cash–a 63% premium over Friday’s closing price of $7.69.


Overnight Headlines (Links)

WORLD and U.S.

China’s Growth Engine Declines

Euro-Zone Economic Data Bring Relief

GOP Race Intensifies, Romney Attacked


AIA Eyes ING’s Asia Operations

Jet Rivals Keep Tight Race

European Car Market Slides


Yields Drop, Easing Heat On Europe

ECB Seeks Plan B

U.S. Steps Up S&P Inquiry