Morning Report: Earnings season kicks off

Vital Statistics:

S&P futures4,609-42.2
Oil (WTI)82.420.23
10 year government bond yield 1.71%
30 year fixed rate mortgage 3.61%

Stocks are lower this morning as earnings season kicks off. Bonds and MBS are up small.

Retail Sales fell 1.9% MOM in December, according to the Census Bureau. Sales were up big compared to a year ago. For the full year, retail sales were up 19.3% compared to 2020. Gas stations and food / drinking places were big drivers of the annual increases.

Industrial Production fell 0.1% MOM in December, while manufacturing production fell 0.3%. These numbers came in well below expectations. Capacity Utilization slipped to 76.5%.

Bank earnings are rolling in. JP Morgan reported record annual earnings, however Q4 numbers were down compared to a year ago. Mortgage originations increased 30% YOY, and were up compared to Q3. Net income was bolstered by investment banking revenue as well as reserve releases. The stock is down a few percent pre-open.

Wells Fargo reported quarterly earnings more than doubled compared to the 4th quarter of 2020. Home lending earnings fell 8% QOQ and YOY, driven by lower volumes and lower gain on sale margins. Volumes were down 11% YOY. The stock is up about a percent this morning.

Lael Brainard signaled a March rate hike in her testimony in front of Congress yesterday. The Fed “has projected several rate hikes over the course of the year. We will be in a position to do that … as soon as our purchases are terminated.” The Fed should be done with its QE adjustments in March, so presumably this means a March hike is on the table.

Consumer sentiment is slipping, according to the University of Michigan Consumer Sentiment Survey. Inflation is a big driver:

When asked to assess their finances, 33% reported being worse off financially than a year earlier, just above the April 2020 shutdown low of 32%, the worst reading since 2014. Twice as many households with incomes in the bottom third as in the top third reported worsening finances (40% vs. 20%). Inflationary erosion of living standards was the main explanation offered by these consumers. The importance of inflation in determining their future financial prospects was dominated by how consumers judged their future inflation-adjusted incomes (see the chart). Nearly half of all consumers (48%) anticipated that the inflation rate would outdistance income increases to produce real income declines. Just 17% anticipated real income gains in 2022.

49 Responses

  1. I appreciate Greenwald upgrading his trolling game:


  2. Interesting piece on the machinations with Manchin.


  3. So, we’ve gone from there being no chance of the FBI was involved in 1/6 to, Ackshually, the FBI was helping the 1/6 crew.

    How long will this Modified Limited Hangout last?


  4. Ezra Klein believes that the lack of central planning of the economy is Joe Biden’s biggest mistake:

    “Getting the pandemic supply chain right would help ease every other supply chain, too. If Americans could move about their lives more confidently, they could buy services instead of things, and if companies could test and protect their work forces more effectively, they could produce and ship more goods.

    But the Biden administration hasn’t fully embraced its role as an economic planner. When Jen Psaki, the White House press secretary, was asked about testing shortages in December, she shot back, “Should we just send one to every American?”

    Psaki’s snark soon became Biden’s policy. The administration is launching a website where any family can request four free tests. That’s a start, but no more than that. For rapid testing to work, people need to be able to do it constantly. But because the administration didn’t create the supply of tests it needed months ago, there aren’t enough tests for it or anyone else to buy now. Part of this reflects the ongoing failure of the Food and Drug Administration to approve many of the tests already being sold in Europe.

    The same is true, I’d argue, about masks. There’s simply no reason every American can’t pick up an unlimited supply of N95s and KN95s at every post office, library and D.M.V. Instead, people are buying counterfeit N95s on Amazon and wearing cloth masks that do far less to arrest spread. Now the Biden administration is moving toward supplying masks. But more needs to be done: How about ventilation? How about building the vaccine production capacity needed to vaccinate the world and prevent future strains from emerging? How about building capacity to produce more antiviral pills so that the next effective treatment can ramp up more quickly?

    For decades, Democrats and Republican administrations alike believed the market would manage supply. We live in the wreckage of that worldview. But it held for so long that the U.S. government has lost both the muscle and the confidence needed to manage supply, at least when it comes to anything other than military spending. So Biden’s task now is clear: to build a government that can create supply, not just demand.”

    Yes, things can get worse.


    • It amazes me that these dipshits never learned that central planning is an economic disaster.


    • So Biden’s task now is clear: to build a government that can create supply, not just demand.”

      But don’t call Ezra a communist!


      • I wonder if it ever occurred to Ezra that these viewpoints about relying on markets emerged out of the failures of government management.


      • More fundamentally, the failure of the Biden administration to submit a purchase order for masks or test kits in a timely manner is not a “market failure”.

        However, what the previous lack of availability of N95 masks does indicate is what happens when you have monopoly suppliers susceptible to pressure from the government to restrict supply so as to make sure it’s reserved for only the “right” people.

        I’m referring to Amazon refusing to sell N95 masks in 2020 due to the government restricting them to health care providers.

        Now there’s plenty of them on Amazon.

        Lastly, Biden ought to focus on things like the rampant package thefts going on in Los Angeles if he wants to help supply issues. I assume you guys have all seen the video of the train yard with all the discarded stolen boxes along side the tracks.


        • More fundamentally, the failure of the Biden administration to submit a purchase order for masks or test kits in a timely manner is not a “market failure”.

          This seems transparently obvious to me, like a clear causative factor that cannot possibly be ignored over overlooked but it seems invisible to Ezra and the elite class commenting on it now, generally.


        • jnc:

          More fundamentally, the failure of the Biden administration to submit a purchase order for masks or test kits in a timely manner is not a “market failure”.

          None of the current shortages or supply chain issues are a “market failure”. The inability of businesses to have enough workers because workers would rather collect Covid unemployment is not a “market failure”. Nor is it a market failure when a producer is required to stop production to retool its factory in order to conform to new Covid regulations. It isn’t even a market failure if production has to decrease because too many workers are out sick with Covid.

          Ezra is a pure ideologue who couldn’t think his way out of a paper bag.

          Liked by 1 person

        • but it seems invisible to Ezra and the elite class commenting on it now, generally.

          The academic left has done yeoman’s work memory-holing all the examples of government failure when meddling in markets.


    • Need some politicians willing to repeat the message that in most areas government is the problem, not the solution.

      Also central planning always fails. Central regulation works to some extent—establishing standards, a common currency, that sort of thing. Although the government doesn’t necessarily have to do that.

      But the government trying to manage everything—product production, career choices, shipping, warehousing, pay scales … it fails spectacularly every time it’s tried. “Wreckage” indeed.


  5. In case anyone had any doubt if the bad old days were back.


    • The NYPD said its hate crimes task force was reviewing the incident but it wasn’t being officially investigated as a hate crime.

      Well thank goodness it wasn’t a hate crime! That will surely bring comfort to the victim’s family.


  6. I wonder if they’ll listen:

    “Carville: Dems ‘whine too much,’ need to highlight accomplishments ahead of midterms”


    • The accomplishments being what?

      That said, Carville might be a lunatic partisan on most issues but he understands whinging doesn’t win elections. But this goes back to the New Democrats apparent inability to read the room. They are so bad at gauging public sentiment right now, I think, that it makes the GOP blush in embarrassment for them.


    • “We know equity and excellence go hand in hand. They are not mutually exclusive,” Superintendent Scott Brabrand said about changing the admissions process.

      But they kind of are mutually exclusive. Just saying the words isn’t an incantation that makes them true.


    • “The selective schools they attend look strong on performance metrics because they only enroll students who are high achieving,” University of Chicago education researcher Ellen Allensworth, who helped perform the 2016 study, told me in an interview.

      A more recent study from the same city looked specifically at disadvantaged students who were able to gain entry, finding that admissions to a selective high school did not improve grades or the likelihood of attending a selective college.

      These studies should not be necessary. “Falling from 1000 feet is generally fatal, a new study shows”. Even the point of school is not to take formless blobs of clay and turn them into engineers, but make sure people already doing well academically can perform at their optimum. That’s the whole point.

      And selective high schools may not be the only place where we’re putting way too much faith in formal education to change our kids’ outcomes.

      Given I see public education up close, I would say the role of formal education is . . . helpful but doesn’t perform miracles. I have no doubt providing the only structure in their lives, for some students, means they turn out better than they otherwise would have. But one of the ways that happens is providing structure for those who don’t have it otherwise, and working to get a basic education into those who otherwise would not have even that.

      The role is not to provide environment which can turn a child from a single parent home where the mother doesn’t have a high school education and lives off disability . . . into a lawyer or a doctor. That story can happen but it won’t be the school system making that happen.


    • the “disparate impact” standard is actually quite difficult to reach

      I thought the whole point of disparate impact is that you don’t have to prove anything any more. It was a way to spot liberal lawyers a few points before the game began.


    • Decades after Martin Luther King Jr.’s fight, American cities still segregate communities by race and class

      “Cities” don’t segregate people by race or even class, per se. People self-segregate.

      The only way for people not to be segregated by class is for them all to be in the same “class”, which will never happen because the whole idea behind identity politics is that you are superior to everyone else. Based on whatever criteria.

      “Nixon’s Department of Housing and Urban Development Secretary George Romney did attempt to use the FHA to meet its goal and actually desegregate white communities”

      And had that happened, the result would have been nobody got federal funding for projects unless they literally did forced relocation. Why is that the government’s job, anyway, to “desegregate white communities”? Why not just make sure there’s no discrimination and let it go from there?

      Love how Hannah-Jones is used as an authority given she’s utterly unreliable as any kind of authority. Pretty much by her own admission.

      “All of this has resulted in the prices of housing and rent skyrocketing. Over the last year, diminished supply as a result of these laws has pushed the cost of shelter higher than ever, straining the pockets of working-class, middle-class, and even some high-income Americans.”

      How did THAT happen? Racism, no doubt.

      “(Perhaps it has something to do with the fact that economically segregationist communities are often ones led by Democrats — in wealthy cities and suburbs, economic discrimination is a normal facet of life.)”

      That’s weird. How did THAT get in there?

      “We know in predominantly white communities that wealthy whites will use zoning to exclude lower-income whites. We also know, for example, in Prince George’s County, Maryland, a predominantly Black community, that there are efforts by wealthier Black people to exclude lower-income Black people through exclusionary zoning.”

      So no one but us should be able to create a community that we consider healthy and productive? And, you know, safe. Wealthy black people aren’t discriminating on race and don’t dislike poor people for being poor. It tends to be the crime that comes with that. If you want less discrimination about “affordable” housing, have it comes with a few 100 extra beat cops and prosecutors who keep violent criminals in jail.

      Good lord the miracles people think the government can perform because “the right policy”.


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