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Market Commentary All markets were relatively quiet yesterday All markets were relatively quiet yesterday. Intel exceeded expectations and issued a positive forward looking statement. On the other hand retail sales were nominally weaker than analysts’ views. The Minutes of June’s FOMC meeting were largely as expected. As widely discussed the averages have been on a major advance the last five days, rising between 3.2% and 4.1%. Was yesterday just a pause in the advance? Obviously this depends upon the data and earnings. There are a multitude of high profile profit releases including JP Morgan, CitiBank, Bank Significant economic statistics released today include the PPI, Initial Jobless Claims, Empire Manufacturing, the Philadelphia Fed, and Industrial Production/Capacity Utilization. Last night the foreign markets were mixed. The Dow should open moderately higher on the strength of JP Morgan’s earnings. Profits exceeded expectations as loan losses were less than expected thus resulting in a reduction of provisions for such loans. As mentioned several times a reduction in such loan loss provisions—the result of improving loan portfolio because of a recovering economy--could potentially cause a turbo charged earnings gains for the financials, especially the tier II and tier III institutions. Moreover as credit improves the probability bank lending returns rises. As noted a gazillion times excess bank reserves are around $1.3 trillion versus the historical average of $1 to $2 billion. [Federal Reserve] Also as per the Federal Reserve bank lending is down about 25% from its 2007 apex. The reason for these record reserves and no lending…fears of further credit deterioration and regulatory over kill. Is the bank credit cycle about to turn? In my view if Citi and Banc The 10-year is off 4/32 to yield 3.06%. The information is the personal views of Kent Engelke and is not necessarily indicative of those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed here are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. Capitol Securities Management, Inc. is a Mid-Atlantic based, privately owned brokerage and investment firm with branch offices in Mclean and Richmond, VA, Boston MA, Hickory, NC, Florham Park, NJ and Tampa, FL. Capitol employs over 170 fulltime investment professionals and independent affiliates in locations from New England to Florida and has been serving the needs of its investors for over 25 years. It is a member of FINRA and SIPC. © Copyright 2008 Capitol Securities, Inc. All Rights Reserved. |
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