Stocks traded in mixed fashion for most of the day before a low volume selloff closed the Dow at 25,250 down 89 points. Earnings reports are starting to come in at a faster pace. Tech stocks sold off again today thanks to a downgrade on Apple and Netflix. Interest rates crept higher as the 10-year treasury bond yielded 3.15%. Brian Wesbury noted on his blog that he estimates real GDP growth is now running at 4%.
Bank of America reported earnings and the numbers were solid. Revenue was up 10% (the highest reading in over 2 years) and net income grew by 43% to $11.4 billion. The bank reported growth in wealth management, consumer banking, loans and deposits. Tier 1 capital was over 11% and charge offs were lower. One area of weakness however was investment banking fees which declined 18% because B of A was less aggressive in doing bond deals and lost some business to non-bank lenders or so called “Shadow banks”. While both top and bottom lines were above estimates, B of A’s stock price moved lower as the gurus digested the earnings news. Later this week the bank will resume its share repurchase program which had been in black out heading into earnings.
Lumber prices continue to fall. The Random Lengths Framing lumber index hit $373 down from $389 as the supply of lumber outpaced demand. Up in Canada, several mills are temporarily shut down due to three factors. One mill cited falling lumber prices versus high log prices. Several mills closed due to a lack of logs because the fire season forced a cessation of logging operations and lastly the recent natural gas pipeline explosion near Prince George caused some mills to close until gas service can be restored. Retail sales in the US came in at 0.1% and missed expectations but this was attributed to the effects of Hurricane Michael and is expected to be temporary. US housing has softened but, according to First Trust, is still well below the level needed to keep up with population growth.