What’s the Story?

by CC April 17, 2012 9:12 am • Commentary


U.S. stock futures advanced, following a two-day decline in the Standard & Poor’s 500 Index, as increased demand at a Spanish auction helped ease concern about Europe’s sovereign debt crisis.

Bank of America Corp. and Citigroup Inc. (C) both advanced 1.6 percent, following gains in European lenders. U.S. Bancorp, the nation’s fifth-largest lender by deposits, climbed 0.7 percent as first-quarter profit increased 28 percent. Goldman Sachs Group Inc. added 0.3 percent after earnings beat estimates and the company boosted its dividend 31 percent.

S&P 500 futures expiring in June rose 0.7 percent to 1,372.70 at 8:53 a.m. New York time. Dow Jones Industrial Average futures increased 73 points, or 0.6 percent, to 12,923.

Equity futures rose as Spain sold 12-month and 18-month bills a day after borrowing costs climbed to the highest level this year. Investors also watched earnings reports. While S&P 500 per-share profit growth slowed to 1.7 percent during the first three months of the year from 4.9 percent in the fourth quarter, it will accelerate to 8.6 percent during all of 2012, according to analyst estimates compiled by Bloomberg.

Stock futures gained even after a report showed builders began work on fewer homes than forecast in March, signaling a sustained industry recovery will take time to get under way.

American banks joined a rally in European lenders. Bank of America added 1.6 percent to $8.93. Citigroup increased 1.6 percent to $34.55.


Builders began work on fewer homes than forecast in March, signaling a sustained industry recovery will take time to get underway.

Housing starts dropped 5.8 percent to a 654,000 annual rate, less than the lowest estimate of economists surveyed by Bloomberg News and the least since October, Commerce Department figures showed today in Washington. The slump was led by the volatile multifamily category, which at the same time showed a jump in permits, a proxy for future construction.

While warmer weather may have spurred home construction at the beginning of 2012, a competing supply of cheap existing properties may be steering potential buyers away from purchasing a new home. That means home construction may not help boost the economy in 2012.


Goldman Sachs Group Inc reported higher-than-expected quarterly earnings thanks to aggressive cost-cutting and strong investment banking and trading revenues, and the Wall Street bank raised its dividend.

Goldman earned $2.1 billion, or $3.92 per share. In the year-ago period, which was generally stronger for investment banks’ trading and banking activity, it earned $4.38 per share, excluding a one-time cost for buying back preferred stock.

Analysts had expected $3.55 per share, according to Thomson Reuters I/B/E/S.

Goldman said it would raise its quarterly dividend to 46 cents per share from 35 cents.


Apple shares are down 9.9% from the most recent intraday record high hit on April 10. Yet in the same time span, the S&P 500 has declined 0.9%.

“I don’t think Apple is a reason that’s going to weigh down the broader markets materially,” Doug Kass of Seabreeze Partners said in a quick chat with MarketBeat.

This divergence between Apple and the rest of the market was especially pronounced on Monday. While Apple shares declined 4.1%, the Apple-less Dow Jones Industrial Average jumped 71 points, or 0.6%, to 12921 amid better-than-expected retail-sales data. Of the blue-chip index’s 30 components, 24 rose.

Meanwhile the S&P 500 edged 0.05% lower. Without Apple, it would have risen about 0.14%, according to S&P.

Stock-market optimists say the fact that the S&P 500 hasn’t suffered a significant tumble during Apple’s slide is actually a bullish indicator. If the world’s biggest stock slumps, but everything else treads water, the market must be stronger than many previously thought.

“The contrarian would say [yesterday’s action] was a sign of a healthy market,” Mr. Kass said.

To be sure, the Apple phenomenon for much of this year can’t be understated. The tech-heavy Nasdaq Comp’s 15% year-to-date advance — largely due to Apple — is almost three times more than the Dow’s 5.8% rise.

If Apple’s sudden reversal turns into a more sustainable downtrend, it may be hard for investors to keep their cool.

But for now, the market is holding steady.

Earnings season kicks into high gear today. Goldman Sachs, Coca-Cola, Yahoo, IBM, Intel and Johnson & Johnson are some of the big-name companies that are scheduled to report quarterly results.


From an intermediate perspective, the S&P 500 is 102.4% above the March 2009 closing low and 12.5% below the nominal all-time high of October 2007.