By Carlos Guillen
After losing over 179 points yesterday, the Dow Jones Industrial Average is attempting to make up for those losses today, supported by better than expected retail sales numbers and rather encouraging earnings from the likes of J.P. Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC).
Nicely encouraging today was retail sales data that showed that the consumer is still holding strong. According to the U.S. Census Bureau, retail sales during December increased year-over-year by 4.1 percent and increased month-over-month by 0.2 percent, better than the Street's consensus estimate calling for no change month-over-month. Excluding automobile related revenues, retail sales increased year-over-year by 3.7 percent and increased month-over-month by 0.7 percent, better than the Street's consensus estimate calling for a 0.4 percent month-over-month rise. Of the thirteen categories that make up the result, twelve climbed, led by an 8.7 percent increase in motor vehicle & parts and a 10.3 percent rise in non-store retailers. This better than expected consumer data comes after witnessing a much worse than expected job gain in the same month; nonetheless, given the importance of consumer spending, as it represents 70 percent of gross domestic product (GPD), continuing growth in retail sales may help to support the belief that GDP growth in the fourth quarter may come in better than expected.
While the December retail sales numbers bode well for GDP growth in the fourth quarter, the latest data from Redbook Research showed a slight decline in chain-store sales during the first week of the new year. As it stands, national chain-store sales edged down 0.3 percent in the first week of January from the comparable week in December. The decline fell below targeted growth of 0.2 percent. Using the year-ago week as a comparison, chain store sales were up 2.9 percent, but they were still below a targeted 3.4 percent increase.
As earnings season ramps up, we got a view of earnings from two of the nation's largest banks, and the better than expected results certainly pave the way for a more optimistic view of things to come. J.P. Morgan Chase reported fourth-quarter earnings per share of $1.30 that topped analyst estimates by six cents. However, profit and revenue declined from a year earlier amid a large drop in investment-banking earnings. Moreover, Wells Fargo reported fourth-quarter earnings per share of $1.00, beating analyst's estimates by two cents, even as the bank reported a slowdown in its lucrative mortgage business.
With more speeches from Fed officials on schedule for today's session, we can expect some gyrations in stock movement, but a finish in the green is pretty much a done deal.
Small Business Update
By David Urani
The NFIB gave out its monthly update on conditions for small businesses, with its December small business optimism index. The index has now followed up a dive in October (triggered by Obamacare) with two consecutive increases, bringing it back to where it was in September. That move was helped by outlooks for general conditions, which still weren't great at -11, but up from -20 in November.
Businesses note some consumer strength in areas such as auto, but in general conditions haven't strengthened enough to spur rounds of hiring or expansion plans. Between taxes and government interference the government remains small business owners' biggest problem, with 43% of respondents naming one of those two issues as their chief threat. On the positive side, 'poor sales' are being cited by just 14% of owners, versus 19% last year.