We have a number of banks reporting today, with Goldman Sachs and Wells Fargo among the prominent names. Wells Fargo came in-line with expectations, while Goldman beat on earnings, but came short on the top line. Among trust banks, State Street and Bank of New York Mellon came ahead of expectations, while Northern Trust fell short.
Among other earnings reports, Apple dazzled us yesterday with their quarterly numbers. They literally crushed consensus numbers, highlighting the immense earnings power of the Apple franchise. The key question to handicap going forward will be the sustainability of Apple’s competitive edge should Steve Jobs’ sick leave become an extended one.
On the economic calendar, we had a mixed Housing Starts and Building Permits report. Starts dropped more than expected in December, while the positive November numbers were revised down. Permits, on the other hand, surged at a greater-than-expected rate. Starts had been expected to modestly decline, largely reflecting bad weather. Permits, on the other hand, are less exposed to weather-related issues and are a good leading indicator of future construction activity.
Housing Starts had been moving up in the last three months, but hadn’t fully recovered from the expiration of the temporary tax credit in April 2010.
The labor intensive construction industry has been a key contributor to prior economic recoveries. But its missing-in-action status this time around explains the tepid pace of jobs growth. On the positive side, low Housing Starts levels keep housing inventories at manageable levels.
Sheraz Mian
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