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Wednesday, January 18, 2012

Germany paid the lowest interest rate in its history in a  two-year bond auction this morning, even as the country lowered its economic growth outlook for 2012. The World Bank also came out with a lowered growth outlook for the global economy this year, but there is hardly anything newsy there as the markets have been sizing up these growth questions for a while now.

On the domestic economic front, we have the PPI and Industrial Production reports on deck, but the focus today will be on the busy earnings calendar. The most important earnings report this morning is from Goldman Sachs (GS - Analyst Report), which came out with an earnings beat, though its revenue numbers missed expectations. Earnings estimates for the Wall Street titan had come down significantly in recent weeks to reflect the soft capital markets trends in the last quarter of the year. We saw similar weakness in the capital markets results from J.P. Morgan (JPM - Analyst Report) and Citigroup (C - Analyst Report) in recent days.

But unlike the brokerage business, the regular commercial banking business appears to be picking up as demand for loans has started to improve. This trend was evident in this morning’s earnings beat from U.S. Bankcorp (USB - Analyst Report) and yesterday’s strong results from Wells Fargo (WFC - Analyst Report). Even Citi and J.P. Morgan had reported improved loan growth in the fourth quarter. Results at PNC Financial (PNC - Analyst Report), however, diverged from this favorable trend, as the Pittsburgh bank missed expectations.

Among custodial banks reporting this morning, Bank of New York Mellon (BK - Analyst Report) missed expectations due to weak investor services revenue during the quarter. We had similarly weak results this morning from the other custodial banks, Northern Trust (NTRS - Analyst Report) and State Street (STT - Analyst Report). A major earnings release after the close today is from the online retailer, eBay (EBAY - Analyst Report).

Sheraz Mian
Director of Research

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