Big Oil Sets the Stage for a Big Quarter

Stocks have traded in a narrow range today as news gives investors little courage to buy or sell big. As of 3:20 p.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up just nine points, while the S&P 500 (SNPINDEX: ^GSPC  ) is down less than a point.

The biggest economic news of the day was the U.S. Department of Commerce announcing that the trade gap widened 16% to $48.7 billion in November, but that's not necessarily a sign of doom and gloom, because imports and exports can swing wildly month to month. JPMorgan's (NYSE: JPM  ) analyst did cut fourth-quarter growth estimates from 1.5% to 0.8%, but until we hear actual numbers, I wouldn't be too alarmed.

Chevron (NYSE: CVX  ) was one of the more notable movers today, gaining 1.1%. Management said earnings would be "notably higher" than the $2.69 per share it earned in the third quarter. Production of liquids and natural gas were up both in the U.S. and abroad through the first two months of the quarter, which will drive results. The price of oil and natural gas has increased over the past few months, and with economic stability returning in the near term, integrated oil companies should do well.

The banking sector was a bit uneasy today after Wells Fargo (NYSE: WFC  ) reported fourth-quarter earnings. The company posted a strong net income of $5.1 billion, or $0.91 per share, beating estimates. But investors are reading between the lines today. The company's interest margin -- a measure of interest income minus interest expense divided by assets -- fell from 3.89% a year ago to 3.56% last quarter. Wells Fargo's shares have fallen 1.4% as a result, while Bank of America (NYSE: BAC  ) and JPMorgan are down 1.4% and 0.3%, respectively.

Wells Fargo is big in the mortgage business, so the lower margin is a concern, but Bank of America's business is even more leveraged to mortgages, so that's why the stock is down big today. The good news is that Wells Fargo CEO John Stumpf said there's "no doubt" that housing has turned the corner, so in the long term, these stocks should be in good shape.

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  • Report this Comment On January 11, 2013, at 4:20 PM, gmcleod752 wrote:

    When Big Oil Makes a lot of money by selling that high priced gasoline, it pulls money out of other consumer spending such as food, clothing, and other discretionary things like shopping, going out for dinner, going to the movies. Last year, I added 50% to my fuel costs and then cut out that amount of money from other things. So what might be good for big oil, in my case, is certainly not good for consumer spending on other goods and services. Guess what, with that 2% increase in payroll taxes and 50% increase in our medical insurance premiums for 2013 we are going to whack out another $2,300 in consumer spending. We now plan on one nite out for dinner once a month, but no drinks, no beverages, no deserts, and no appetizers. No Cable, no movies, no rental DVD, those are all gone from the budgets. I'm going to cancel my smart fone too, that will save us $900 per year. Consumers are not getting pay raises, we get laid off and are lucky to find a job at half pay. Oil, taxes, and food keep going up. Our only course of action is cut cut cut. We buy only items on sale and I've started shopping salvation army for work clothes. Keep jacking up those oil profits and keep watching other spending patterns take a nose dive. I'm looking at renting two bedrooms to some Vet friends. That's going to reduce two full apartment rentals and services that go with it. Further, I just planted 26 fruit trees and will be growing vegies and some chickens. I figure I can knock another $2500 off my food bill per year.

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