Stock Market News for April 14, 2011

On Wednesday, a choppy session finally came to a close with the benchmarks gaining modest points as the Federal Reserve provided assurances that the economy was improving and President Barack Obama announced plans to cut the U.S. budget deficit by $4 trillion over the next 12 years. Initially, the markets were helped by upbeat earnings result from JPMorgan. However, as investors sensed worrying factors about the bank,financials arrested the markets from making further gains.

The Dow Jones Industrial Average (DJIA) gained 0.06% to close at 12,270.99. The Standard & Poor 500 Index (S&P 500) rose 0.02% to end at 1,314.41 and the Nasdaq signed off at 2,761.52, gaining 0.61%. The fear gauge CBOE Volatility Index (VIX) fell below 17. Consolidated volumes on the New York Stock Exchange, NYSE Amex and Nasdaq were 6.9 billion shares, well below last year's estimated daily average volumes of 8.47 billion. Advancing stocks outnumbered the decliners on NYSE.

JPMorgan Chase & Co. (NYSE:JPM) reported a stronger-than-forecasted earnings result with a 67% surge in quarterly profits. Investors gained confidence following the results and the broader markets climbed higher. However, investors sensed concerns about the company’s mortgage lending business and disappointing comments from top official dragged the stocks lower. The company’s CEO, Jamie Dimon shot down expectations of any further dividend increases and said: "I wouldn't look for a dividend increase the next couple of quarters." "We would have permission to do a little bit more on the dividend, but we would have to ask regulators for an increase in this environment," he added.

Shares of JPMorgan dipped 0.8% and settled at $46.25. In addition, federal banking regulators sanctioned the nation’s largest banks over a pattern of misconduct and negligence in mortgage practices and that took the financial sector further down. Without assessing any fines, the regulators sanctioned banks like Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), MetLife, Inc. (NYSE:MET), PNC Financial Services Group Inc. (NYSE:PNC), SunTrust Banks, Inc. (NYSE:STI), U.S. Bancorp (NYSE:USB) and Wells Fargo & Company (NYSE:WFC) and they dipped 1.5%, 1.1%, 1.3%, 0.9%, 2.0% and 1.4%, respectively. The Financial Select Sector SPDR Fund dropped 0.8%.

Markets were helped by encouraging data from the Federal Reserve's Beige Book that noted an improvement in economic activity in the US from the beginning of March till April 4. The Beige Book, which is a compilation of mostly anecdotal evidence from the 12 Federal Reserve Districts about the state of the economy, reported that the improvement was boosted by the manufacturing and retail sectors. Consumer spending was reported to have “picked up modestly in most Districts” and automobile sales were higher in a majority of the Districts. However, the nuclear disaster in Japan and surging energy prices suggested an uncertainty over the outlook.

President Barack Obama announced plans of cutting down the U.S. budget deficit by $4 trillion over the next 12 years. He divulged plans to reform Medicare, cut spending on drugs and overhaul tax policies, among other major steps. New reforms would end tax breaks for families having an annual household income of more than $250,000. He cautioned about the incremental debt problem and commented: "If our creditors start worrying that we may be unable to pay back our debts, it could drive up interest rates for everyone who borrows money — making it harder for businesses to expand, or families to take out a mortgage…We can solve this problem."

Meanwhile, the Commerce Department reported a 0.4% rise in retail sales in March this year while economists had expected a rise of 0.5%. This is the ninth consecutive month of increase but it is also the smallest gains for the period. Auto sales plunged and consumers were made to pay higher prices for gasoline. The Energy Information Administration reported a 35-cent rise in gasoline prices to $3.62 per gallon in March and had cautioned earlier in the week that prices may rise to $4 per gallon during the summer.

The government also reported an increase in business and crude inventories. Business Inventories increased by 0.5% in February to $1,457.9 billion, lower than the consensus estimate of a 0.8% increase. Crude inventories increased by 1.6 million barrels from the previous week to 359.3 million barrels. Crude for May delivery on the New York Mercantile Exchange gained 86 cents to move up to $107.11 per barrel.

The earnings season has already kicked off unofficially with the earnings release from Alcoa, Inc. (NYSE:AA). Investors’ will keep a close eye on the earnings release of semiconductor companies as supply-demand dynamics were affected due to the natural disaster in Japan. Companies like Texas Instruments Inc. (NYSE:TXN), Intel Corporation (NASDAQ:INTC) are scheduled to release their results on Monday and Tuesday, respectively. Among other semiconductor stocks, SanDisk Corp. (NASDAQ:SNDK), Cypress Semiconductor Corporation (NASDAQ:CY) and QUALCOMM Incorporated (NASDAQ:QCOM) will release earnings figures next week and their shares jumped 0.6%, 0.4% and 0.8%, respectively, on Wednesday.

ALCOA INC (AA): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

CYPRESS SEMICON (CY): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

METLIFE INC (MET): Free Stock Analysis Report

PNC FINL SVC CP (PNC): Free Stock Analysis Report

QUALCOMM INC (QCOM): Free Stock Analysis Report

SANDISK CORP (SNDK): Free Stock Analysis Report

SUNTRUST BKS (STI): Free Stock Analysis Report

TEXAS INSTRS (TXN): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

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