Wells Fargo: Financial Winner
The broad indices declined for a second straight day, with carryover from the Federal Reserve's release on Wednesday of minutes for the Federal Open Market Committee's meetings late last month. There was growing disagreement among committee members on when the central bank might curtail its "highly accommodative" stimulus policy, which includes holding the federal funds rate in a range of zero to 0.25%, along with monthly purchases of $85 billion in long-term securities.
KBW analyst Christopher Mutascio said in a report Thursday that certain comments made by committee members were "more dovish than hawkish," supporting his view that "the Fed is going to leave short-term interest rates low for a longer time than some currently believe."
Mixed Economic Reports
The Labor Department said Thursday that initial unemployment claims for the week ended Feb. 16 increased by 20,000 to a seasonally adjusted 362,000, from a revised 342,000 the previous week. Economists expected claims to rise to 347,000, according to Zacks.
The four-week moving average for jobless claims rose to 360,750 from the previous average of 352,750.
Markit Economics said Thursday its manufacturing output index for February showed the "sharpest rise in manufacturing output in almost two years," with a reading of 58.1, increasing from 56.8 in January. However, the Purchasing Managers' Index (PMI) came in at 55.2, down from 55.8 in January. An index reading of over 50 indicates economic expansion.
Markit said in its release that "incoming new work received by manufacturers also rose strongly during February. However, the rate of increase eased from January's 32-month peak."
The National Association of Realtors (NAR) said existing-home sales in the U.S. increased by 0.4% in January to a seasonally adjusted annual rate of 4.92 million from a revised 4.90 million in December. The sales pace in January was up 9.1% from a year earlier.
NAR chief economist Lawrence Yun said "we've transitioned to a seller's market in much of the country," and that "buyer traffic is 40% above a year ago."
The Federal Reserve Bank of Philadelphia said manufacturers responding to its local Business Outlook Survey for February "reported declines in activity this month," and that "indicators for general activity and new orders have now registered negative readings for the past two months." The survey's diffusion index of current activity came in at minus 12.5 for February, declining from minus 5.8 in January. Economists had expected 4 for February.
Shares of Wells Fargo have returned 4% this year, following a 27% gain in 2012. The shares trade for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.1 times the consensus 2014 earnings estimate of $3.89. The consensus 2013 EPS estimate is $3.65.