U.S. equities are consolidating despite solid share trading in the financial space following robust earnings from the major commercial and investment banks. Goldman Sachs was the latest contributor and remains the biggest contributor to the Dow’s post-election 30% gain. U.S. economic data continues to be mixed, with inflation remaining solid allowing U.S. yields to remain elevated. Retailers are under pressure after Target cut its holiday sales.
Goldman Beats on Earnings
Goldman Sachs was the latest financial giant to release its financial results. Their robust results follow excellent quarterly number posted by Bank of America, JP Morgan and Morgan Stanley. The company reported profits of $5.08 a share on revenue of $8.17 billion. The company’s profits soared to $2.15 billion a 4-fold increase from the prior quarter. Goldman was expected to post earnings of $4.82 a share on revenue of $7.742 billion.
U.S. yields remain elevated following headline gains in CPI, but along with the core reading these came right in line with median forecasts. The 10-year probed 2.375%, before easing to 2.36%, and the 30-year yield tested 2.975%.
CPI Climbs 2.1% Year over Year
U.S. Consumer Price Index increased by 0.3% in December, in line with expectations while the core reading which excludes food and energy increased by 0.2% as expected. There were no revisions to November’s 0.2% gains. On an annual basis, headline prices accelerated to a 2.1% year over year pace versus 1.7% year over year, with the core up at 2.2% year over year versus 2.1% year over year. The two biggest contributors to the gains were energy and transportation. Energy prices climbed 1.5% versus 1.2% previously and are up 5.4% year over year. Transportation costs rose 1.0% last month.
Not all the U.S. news was rosy. U.S. MBA mortgage market index dipped 0.8%, while the purchase index dropped 5.2% and the refinancing index climbed 6.8% for the week ended January 13. Those shifts were aided by a 5-basis point dip in the average 30-year mortgage rate to 4.27% after a decent round of Treasury funding.
U.S. chain store sales dipped 0.8% in the week ended January 14, following a 2.2% jump in the prior week. The annual pace slowed to a 0.4% year over year rate, from 1.1% year over year previously. Poor weather contributed to the softness in Department Store sales.
Energy equity share trading also continues to flounder as oil price consolidate in a relatively tight range. The weaker dollar has helped prices, along with OPEC’s pledge that they will continue to cut to rebalance inventories. Reports have already shown that Saudi Arabia has more than cut its fair share of deliveries. Other producers are attempting to quickly fill the gap created by the lack of OPEC crude. The U.S. EIA forecasts February shale production will be about 40k barrels a day higher than January, and offsetting some OPEC output cuts. Prices have for the most part have treaded water inside a $51-$54 range for the past month, and more of the same is expected.