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Apple Booted by Goldman, Fannie Mae's Record Profit, and Other Financial Stories

By John Maxfield - Apr 2, 2013 at 1:02PM

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There's never an absence of news impacting financial stocks, but weeding through all of it can be a chore in and of itself. To that end, here are five of today's biggest finance-related stories.

There's never an absence of news impacting financial stocks, but weeding through all of it can be a chore in and of itself. To that end, here are five of today's biggest finance-related stories.

1. Fannie Mae's record profit
In September of 2008, the U.S. government had to step in and seize the then-ostensibly private mortgage giants Fannie Mae and Freddie Mac. The plan at the time was to prevent their failure, stabilize the mortgage market, and to then gradually wind the entities down. As The Wall Street Journal noted at the time, "[Treasury Secretary Henry] Paulson's weekend announcement represented one of the most sweeping interventions in financial markets since the Depression, essentially putting the government in charge of helping finance American mortgages."

The question of what to do with at least Fannie Mae became slightly more complicated today, after the now-government controlled entity reported its largest annual net income in its history -- click here to see the press release. For the fiscal year 2012, it earned $17.2 billion -- $7.6 billion of which came in the fourth quarter alone. "Solid business fundamentals such as improving performance of our book of business and improvements in the housing market led us to report the largest annual and quarterly net income in the company's history," said Susan McFarland, executive vice president and chief financial officer. "We expect to remain profitable for the foreseeable future and return significant value to taxpayers."

2. Bank of America exercises its Fed-given rights
That didn't take long. Less than three weeks ago, the nation's largest banks learned whether or not they'd be allowed to return more capital to shareholders following the Federal Reserve's comprehensive capital analysis and review. For its part, as I discussed here, Bank of America (BAC 0.95%) got the go ahead to repurchase $5 billion in common stock and $5.5 billion in preferred shares. And as promised, it notified investors yesterday in this press release that it had submitted redemption notices for the latter. The move contributes to B of A's efforts to simplify and boost its capital base in the face of the Basel III requirements.

3. Former SEC chief goes through revolving doorThe line between Washington and Wall Street became a little less distinct today, after the former chairwoman of the Securities and Exchange Commission, Mary Schapiro, announced that she will be joining the consulting firm Promontory Financial Group, which has "built a reputation as a shadow regulator by hiring scores of former government officials," according to The Wall Street Journal.

To say that Shapiro is a prime catch for lobbying firm is an understatement. She's spent "28 of the last 32 years as a regulator" and is the only person to have led all three of Wall Street's biggest regulators: the SEC, the CFTC, and FINRA. But don't get the wrong idea, "In my case, there's no revolving door ... I won't ever be going back to government," Shapiro said in an interview with the Journal. That, of course, misses the point. While she and Promontory refused to disclose what she'll be paid, it's safe to assume that it'll be more than the $165,000 that she earned in her last job.

4. Apple Removed from Goldman's conviction buy list
While Wall Street analysts are effectively glorified salesmen -- particularly in the aftermath of the JOBS Act -- their published "opinions" nevertheless influence the market. Yesterday, chip-making giant Intel found itself on the business end of a JMP Securities' downgrade. And today, Apple (AAPL 4.08%) is in the same unenviable position, after Goldman Sachs (GS 1.53%) removed the company from its "famous 'Conviction Buy' list," whatever that's supposed to mean:

We remove Apple from the Americas Conviction List, but we maintain our Buy rating. Based on Monday's close, AAPL has gained 33.8% since being added the Conviction List on December 12, 2010, versus a 25.9% gain in the S&P 500. Our new 12-month target price is $575, from $660 previously, based on a 13X multiple (previously 14X) on our lowered CY2013 EPS estimate of $44.64 (previously $47.29). Key risks include delayed product cycles, supply chain difficulties, product price erosion, and a slower pace of product innovation.

I guess what Goldman is trying to say here is that you should buy Apple, but just not with conviction...

5. Today's data
Finally, there are two data releases that promise to influence the direction of markets today. First, the Commerce Department reported -- click here for the press release (link opens PDF) -- that orders for goods produced in domestic factories rose 3% in February. This marks the biggest gain in five months and comes on the heels of a 1% contraction in January.

And second, the nation's largest carmakers released sales figures for the month of March this morning. Among others, Ford (F 3.89%) notched a 6% increase with 236,160 sold during the month. Its sales of cars were even with last year, while sport utility vehicles and trucks were up 14% and 6%, respectively. General Motors (GM 3.07%) reported similar results, also experiencing a 6% year-over-year increase. According to its vice president of U.S. sales, "GM delivered its best March sales in five years thanks to a strengthening economy and new products, and we are expecting our third consecutive increase in market share versus last year."

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Stocks Mentioned

The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
$328.58 (1.53%) $4.95
Bank of America Corporation Stock Quote
Bank of America Corporation
$37.02 (0.95%) $0.35
Apple Inc. Stock Quote
Apple Inc.
$149.64 (4.08%) $5.86
Ford Motor Company Stock Quote
Ford Motor Company
$13.63 (3.89%) $0.51
General Motors Company Stock Quote
General Motors Company
$38.57 (3.07%) $1.15

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