Yesterday was a day for the bears. After an unexpected contraction of the economy was announced in the GDP figures and the Federal Reserve described the country's economic growth as fading, it's no wonder that the Dow Jones Industrial Average (DJINDICES:^DJI) fell 44 points, or 0.32%.
Unfortunately for investors, they aren't getting much better news today. The Commerce Department announced the personal income and spending numbers for December this morning, and while personal income grew by an astounding 2.6% (blowing expectations of 0.8% out of the water) the reason behind the jump is a bit disappointing.
The main driver behind December's growth was compensation rushed out to people before the new year's higher tax rates. The compensation came in the form of special dividend payments, bonuses and other "irregular" pay -- meaning that this wasn't true growth and will not continue.
Spending, on the other hand, was outright disappointing. Though it increased in December by 0.2%, it missed expectations of 0.3%.
Though we may need to dig a little more into the recent announcements to figure out whether the data will average itself out, there's movement in the Dow that will also help the index stay relatively flat.
Start with the good news
Cisco Systems (NASDAQ:CSCO) was up 1.26% this morning following news of a new acquisition. Following on the heels of its announced acquisition of Israeli mobile startup Intucell, Cisco announced that it would be buying Czech network security start-up Cognitive Security. Cisco is aiming to combine the start-up's real-time behavioral analytics with its cloud-based global threat intelligence system.
Mobile provider AT&T (NYSE:T) was also up 1.07% this morning following news of the company's plan to improve reception in problematic coverage areas. With its new small cells, the company is able to target the areas with coverage problems. The small cells have been well-received, enhancing reception both indoors and out, with improvement rates of 15% and 17%, respectively, in test areas. AT&T plans to deploy more small cells later this year, with an expected deployment of 40,000 over the next two years.
Now for the downer
Bank of America (NYSE:BAC) was having a much better start to 2013 than it had last year. With the company putting some distance between itself and legal troubles, investors had been feeling much better about its prospects moving forward. But with the announcement yesterday from the Mortgage Bankers Association that mortgage application rates fell 8.1% and its refinancing index was down 10%, both in the past week, Bank of America is seeing red.
Down 1.10% this morning, the bank, as well as its compatriots, will be feeling the pain from this announcement at least until next week. While most of the big banks' financials improved in the fourth quarter, a great deal of that was a result of the new rush of mortgages and refinancings, as the fees taken in drove their revenue growth. Now, Bank of America has a smaller degree of exposure from this news than Wells Fargo or JPMorgan, which dominated the new mortgage origination seen in 2012. But that doesn't mean that investors will give it any more slack -- the bank has had to deal with troubles for quite some time, and this new issue is just one more straw on the camel's back.