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The markets were hit with a barrage of discouraging economic news this morning, sending the Dow Jones Industrial Average (DJINDICES: ^DJI ) down sharply, with the index trading at a 60-point loss just before 11 a.m. EDT. Later this afternoon, the Federal Open Market Committee will be releasing their determinations from the latest meeting, giving investors hope that the index may rise later in trading.
One after another
Manufacturing in the U.S. slowed in the month of April, with only a slight expansion of the sector. The index of national factory activity fell from 51.3 to 50.7, which missed expectations and brought the sector closer still to the 50 mark, which is the divide between expansion and contraction. In what is perhaps a sign of optimism that the recent economic slowing is just part of a "spring swoon" phenomenon, forward-looking orders in manufacturing were up versus the prior month.
In another report, construction spending fell 1.7% in March, the lowest in a seven-month period due to the rapid cuts in governmental spending on construction projects, which overwhelmed the gains made in the housing sector. Regardless of the drop, construction spending in March was up 4.8% compared to the prior year, suggesting improvements are continuing despite a monthly slowdown.
There is little speculation that the FOMC's announcement this afternoon will deviate from prior meetings, with expectations of continued quantitative easing through bond purchases. Since the labor market is not recovering as hoped (which was the point of the QE), a change now would lead to further drops in the market.
Financials take a hit
Though this morning did provide a positive bit of housing news, with mortgage applications up 1.8% from the prior week, financials are slipping. JPMorgan Chase (NYSE: JPM ) is leading the way with a 1.76% drop so far today. Though the news of increasing mortgage business is good for the bank that ranked No. 2 last year in originations, other news may be overshadowing any positive effects. Another top executive has left the bank, bringing the tally of exiting execs to eight within the past few years. Since shareholder voting is now under way to determine whether CEO Jamie Dimon's dual role of president and chairman should be split, the news of more top employees leaving brings attention that the bank likely doesn't appreciate right now -- since it leaves investors wondering how the succession plans for the top spot will be managed now with so much C-suite reshuffling.
Bank of America (NYSE: BAC ) is also down this morning, with a 1.46% drop so far. Disappointed shareholders may be reeling at the bank's reaffirmation of its paltry penny-per-share dividend after improved earnings gave many hope that the bank would return more capital to investors. The bank recently got good news from a New York state judge after MBIA had asked for a pretrial judgment in the two companies' long-standing battle over Countrywide mortgages. The judge had stated that there were enough facts still in dispute that a judgment could not be made for the benefit of either side yet, so the settlement talks continue. But this newest development may be a positive one for B of A, as it shows that there is still debate over whether the bank acquired Countrywide's liability along with its assets.
Outside of the Dow, personal finance company GreenDot (NYSE: GDOT ) is up 10.25% this morning after the company announced earnings last evening. EPS of $0.42 beat analyst estimates by $0.05, boosted by higher card revenue. Though the company did report higher-valued transactions for its cards, it has faced more competition in recent months. With Wal-Mart's (NYSE: WMT ) collaboration with American Express for the Bluebird card, GreenDot found that its biggest retailer was now in direct competition for its customers. Despite the added pressure, GreenDot's cash volume (a tally of transactions and cash withdrawals from the preloaded cards) grew 5.2% in the first quarter. The company was just upgraded this morning to a buy by Compass Point, with a new target price of $20, up from $15.
Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.