More Banks Beat the Street Monday

This week Q1 earnings reporting is in full swing. And many banks continue to lead.

With all eyes on bank health, many of you have asked "Even though my local bank has not failed, do you truly believe there are strong banks out there?" The answer of course is yes. You may remember this list of banks that rejected TARP.

So Monday, while many were busy over-analyzing Bank of America's (BAC) announcement, several smaller banks of note handily beat Wall Street expectations:

1) With a market capitalization of close to $1.7B, BancorpSouth, Inc. (BXS) beat the Street by $0.06 per share. They continued to demonstrate solid profitability with net income of $29.5 million. Aubrey Patterson, Chairman and CEO said, "For the first quarter of 2009, BancorpSouth produced another strong performance in an unusually challenging environment for both the financial services industry and the national economy. This performance was highlighted by solid profitability for the quarter, which contributed to a further improvement in our already strong capital structure. We are encouraged by the steady loan growth we have experienced in a time of increased competition for high quality loans. We also continue to believe that our financial strength and stability, which differentiates us from many industry peers, have contributed to the growth in our loans and deposits."

2) Next Capital City Bank Group, Inc, (CCBG) beat the Street estimate by $0.07 per share turning a profit when the Street expected a loss. The CEO William G Smith reported that, "We grew our loan portfolio by $24 million or 1.2% and maintained our focus on prudently managing the net interest margin, despite historically low interest rates. Our margin at 5.16% was 43 basis points higher than a year ago, and better than the linked fourth quarter. Our execution of the fundamentals of profitable community banking -- basic lending, rational deposit gathering and good expense management -- continues to be both prudent and consistent."

3) And finally, First Defiance Financial Corp. (FDEF) announced a profit of $0.36 per share. Their Chairman William J. Small said, "We're encouraged by the results of our 2009 first quarter, particularly the lower provision for loan losses in this very difficult credit environment. We had very strong mortgage banking activity in the quarter, originating $160 million of residential mortgage loans, which contributed to our improved profitability from the fourth quarter of 2008."

IBM also beat estimates on Monday and more banks will announce earnings throughout the week - perhaps most notable the largely commercial BNY Mellon(BK). When we round up the week, we'll likely note that we still are finding it difficult to substantiate general Q1 earnings bedlam.

Weekly Good News Wrap

The Good News Economist

• The Bank Crisis is Over (click for full story)
  

  Posted: Sun, 19 Apr 2009 05:21:00 +0000

  

  Do our banks still have problems? Yes. But are the top banks still in crisis? No.
  

• Another Thursday; Another String of Good News (click for full story)
  

  Posted: Fri, 17 Apr 2009 05:01:00 +0000

  

  Last Thursday the good news just kept on coming...
  

• Beige Book Hope (click for full story)
  

  Posted: Thu, 16 Apr 2009 03:13:00 +0000

  

  "Five of the 12 districts noted a moderation in the pace of [economic] decline, and several saw signs that activity in some sectors was stabilizing at a low level," the Fed's "Beige Book" summary reported on Wednesday.
  

• Luring First Time Home Buyers and Investors (click for full story)
  

  Posted: Wed, 15 Apr 2009 05:29:00 +0000

  

  

• No Basis For Earnings Fear (click for full story)
  

  Posted: Tue, 14 Apr 2009 05:20:00 +0000

  

  The first two weeks of 2009's earnings season have the perma-bears calling for earnings disasters in the Q1 results. A "sucker rally" is in progress they proclaim. But so far the profit jitters are unfounded and the only "suckers" to be found are packaged as candy on a stick.
  
  

The Bank Crisis is Over

Do our banks still have problems? Yes. But are the top banks still in crisis? No.

You've read here consistently that even when the big banks seemed insolvent, there was no credit crisis at most banks. In fact the data now shows that according to the Federal Reserve, overall business lending by all US banks was up 12 percent in 2008. That actually reverses a trend where lending institutions scaled back loans during the last six economic downturns. Surprisingly a new report by the National Federation of Independent Businesses reveals that only 8 percent of small businesses reported problems in obtaining the financing they needed during this current downturn.

On Saturday Arianna Huffington described the peak of the "crisis" well: "When we castigate 'bankers' for the banquet of greed and corruption, we need to keep in mind that we are really talking about the high-flying financial gluttons of Wall Street who have come to dominate the global credit market, and not the vast majority of much smaller, and much more local 'traditional' banks."

Further Edward Yingling, president and CEO of the American Bankers Association, asserts: "Wall Street and Main Street banking are very different. Of the over 8,000 banks in this country, very few ever made a single subprime loan, and they did not engage in the highly leveraged activities that brought down Wall Street firms." You'll remember all those banks that said, "TARP? No Thanks!"

But now enter data from the last three weeks. Are those top banking entities struggling any longer? No. Are they racing each other to pay back their TARP obligations? Yes. Will the majority pass stress tests. No doubt.

The stress test regulators will likely find there is no need to fix what now is not broken. Top bank liquidity has returned. Ironically what the bank giants are revealing during this earnings season is that the low cost of money from the government combined with a surging demand for new mortgages was all the medicine that was required.

And for all those who love to hate the government programs of the past 6 months: Paulson, Geithner, and Bernanke got it just right.

Another Thursday; Another String of Good News

Today the good news just kept on coming... You'll remember that last Thursday also featured a string of positive economic stories.

• Great News for Chips

  Toshiba posted a smaller operating loss than the company had forecast after production cuts helped ease a glut and drive up prices of the semiconductors.

  Chip-related shares are on the Rise as Samsung Electronics Co., the world’s largest producer has climbed as much as 4.8 percent, while Hynix Semiconductor Inc. has been up as much as 11 percent in Seoul trading today. Japan’s Elpida Memory Inc. has risen as much 9.9 percent in Tokyo and all of Taiwan’s five listed memory chipmakers, including Nanya are advancing ... Stock Symbols: TOSBF.PK, SSNLF.PK, ELPDF.PK

• Tempur-Pedic Investors Will Rest Easy - Earnings Beat Easily

  "An easing commodity environment and our productivity initiatives have generated substantial margin improvement..." -Tempur-Pedic CEO, Mark Sarvary

  http://uk.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUKBNG38324020090416

  Stock Symbols: TPX

• Google: 9.2 percent rise in quarterly net profit

  "Google had a good quarter given the depth of the recession -- while revenues were down quarter over quarter, they grew six percent year over year thanks to continued strong query growth" - Eric Schmidt, CEO
  

  http://uk.biz.yahoo.com/16042009/323/google-profit-first-quarterly-revenue-drop.html

  Stock Symbol: GOOG

• Regions Financial: Surprise Profit

  Following in the footsteps of the major banks this earnings season, Regions Financial announced it will handily beat expectations and like its big brothers will repay it's $3.5 billion infusion from the Treasury ASAP. Estimates had forecast a loss.

  http://finance.yahoo.com/news/Regions-Financial-to-report-apf-14947509.html

  Stock Symbols: RF

  
  

• Surging Home Builder Sentiment

  The US Home builder sentiment index posted it's best one month gain in almost 6 years.

  http://www.reuters.com/article/businessNews/idUSTRE53E51C20090415?feedType=RSS&feedName=businessNews

• Signs of Better Times - Rosetta's Big Debut

  IPOs are here again. Rosetta Stone's issue will likely be seen as the strongest placement in over a year. No doubt observers will begin to contemplate their own shelf registrations...

  http://finance.yahoo.com/news/Rosetta-Stone-soars-42-rb-14947068.html?sec=topStories&pos=5&asset=&ccode=

• Another Big Bank Beats

  So far this has not been a gloomy earnings season.

  JPMorgan beat estimates handily. Bears are struggling to come up with excuses for why these big banks are instantly profitable. This recession started with the banks, it need to end with them.

  http://www.forbes.com/2009/04/16/briefing-americas-open-markets-equity-jpmorgan-housing.html

  Stock Symbols: JPM

• Panic about Jobs subsiding...

  Now that initial claims have fallen substantially for two weeks in a row, panic in the employment arena is subsiding.

  The two week fall supports our data showing that corporations are laying off significantly less workers in Feb and then again in March, than they had earlier in the year...

  http://www.bloomberg.com/apps/news?pid=20601068&sid=aly.gP4Yr97k&refer=home

So far this earnings season there continues to be no basis for earnings fear. In fact as the markets continues it's swift accent higher, the S&P 500 index is now up over 3% since earnings season began last Monday morning.

Beige Book Hope

"Five of the 12 districts noted a moderation in the pace of [economic] decline, and several saw signs that activity in some sectors was stabilizing at a low level," the Fed's "Beige Book" summary reported on Wednesday.

The Fed districts further reported that economic deterioration had moderated in several zones and may be finally bottoming out.

The stock markets of course welcomed the news and rallied higher.

The markets historically figure out rebounding economic activity months before other measurements figure it out.

Earlier this week, Fed Chair Bernanke reported that, "Recently we have seen tentative signs that the sharp decline in economic activity may be slowing in data on home sales, home-building, and consumer spending. A leveling out of economic activity is the first step toward recovery."

The Beige book report continues, "Home prices and construction were still falling in most areas, but better-than-expected buyer traffic led to a scattered pickup in sales in a number of districts."

Luring First Time Home Buyers and Investors

Compiled by Business Week (click to Enlarge)

And Check out these stories:

• Minneapolis home sales are up
  
• Mortgage applications have increased 67.6% From 2008
  
• And the housing market has bottomed...
  

No Basis For Earnings Fear

The first two weeks of 2009's earnings season have the perma-bears calling for earnings disasters in the Q1 results. A "sucker rally" is in progress they proclaim. But so far the profit jitters are unfounded and the only "suckers" to be found are packaged as candy on a stick.

The season kicked off last week with Alcoa(AA) missing forecasts, but painting a quite rosy picture for 2009. AA stock has never looked back.

Then came the Wells Fargo boom-shell and a string of other positive news on Thursday.

And now just days after the Wells Fargo (WFC) surprise we have Goldman Sachs (GS) also crushing the street's expectations. GS also joins a significantly growing list of banks that are now planning to quickly pay back their treasury bailout monies. GS will issue $5 billion in new stock to assist in paying back the US taxpayer swiftly.

And surprises to the upside did not halt with bank cheer Monday night.

Dress Barn (DBRN) also proclaimed a positive 2009 outlook. It raised its forward looking guidance pointing to improving retail trends across all its business units.

Federal Signal (FSS) followed with cheery news also raising its 2009 guidance. The global firm manufactures products and delivers integrated solutions for municipal, governmental, industrial, and airport customers worldwide.

And on Tuesday the insurance sector is likely to applaud loudly for MetLife (MET). The insurance giant asserted that it won't need bailout funds that US Treasury programs are extending to insurance institutions.

And to round out the night of No Fear, J.B. Hunt (JBHT) beat the Street by 2 cents. For them, trucking demand seems to be building again. Their 24c/share earnings were down only 4 cents from the 28 cents a share in the period a year-ago.

Aluminum started producing silver linings last week. Earning season continues this week with the only suckers appearing as red-faced bears on a stick.

The Good News Economist Wrap-up

• Consumer, Investor Confidence Continue Their Surge Higher

  "The Rasmussen Consumer Index, which measures consumer confidence on a daily basis, jumped five points on Saturday to its highest level of 2009. "

• Obama Sees Glimmers of Economic Hope on Good Friday

  "President Obama said Friday that the nation's economy is showing signs of progress as a series of his policies begin to come on line."

• Thursday's String of Positives Leads Wall Street To Good Friday

  Thursday started with a story in the NY Times. According to sources close to the ongoing "stress testing" of the top 19 banks, the banks really aren't as stressed as many had feared.

• More Real Estate Hope

  We have now had a string of encouraging news on the housing recovery.
  

• Sales at Wholesalers Rise

  "Sales at U.S. wholesalers rose in February for the first time in eight month.
  

• The Silver Lining in Aluminum

  Alcoa (AA) kicked off earnings season. It's clear that Q1 is a bridging quarter for a much better 2009.
  

• 10 Top Earners in each Segment will Fuel the Rally

  As we enter the season when companies report their Q1 earnings, many assume that earnings for the first quarter of 2009 will be disappointing. But the reality is that currently the market is looking for news that is "not as bad as expected."
  

  
  

Consumer, Investor Confidence Continue Their Surge Higher

"The Rasmussen Consumer Index, which measures consumer confidence on a daily basis, jumped five points on Saturday to its highest level of 2009. At 74.1, consumer confidence is up 12 points from a week ago, 18 points from a month ago, and at the highest level since the day after Barack Obama was elected President. The Consumer Index is up seven points from a year ago, the first time it has been up year-over-year since 2007."

"The Rasmussen Investor Index gained six points on Saturday to 83.5, its highest level since shortly after Lehman Brothers collapsed last September. Investor confidence is up 6 points from a week ago and 27 points from a month ago. While improving, confidence is still down nine points from a year ago and down 50 points from two years ago."

"Thirty-four percent (34%) of Investors now say the economy is getting better while 44% say the opposite. Those numbers represent a very dramatic turnaround over the past month. One month ago today, just 8% said the economy was getting better while 72% said it was getting worse."

The steady upward trend comes on the heels of a significant jump several weeks ago when in five days the consumer index gained back all the ground it had lost in the previous five months.

It also comes a day after president Obama said he sees "glimmers of hope" for the economy.

Obama Sees Glimmers of Economic Hope on Good Friday

From the Washington Post, "President Obama said today that the nation's economy is showing signs of progress as a series of his policies begin to come on line."

"In brief remarks to reporters after a meeting with his economic advisers at the White House, Obama said there are signs of hope appearing amid the gloomy economic landscape. 'What you're starting to see is glimmers of hope across the economy,' Obama said."

The President said, the signs of progress are unmistakable. With mortgage interest rates at historic lows, refinancing is up.

Obama also lauded the Treasury's investment program aimed at buying toxic assets and strengthening the top 19 banks.

He reported that the effort to increase small business loans is working. The largest Small Business Administration loan program has increased by 20% in the last month.

"We're starting to see progress," Obama said. "And if we stick with it, if we don't flinch in the face of some difficulties, then I feel absolutely convinced that we are going to get this economy back on track."

Obama's comments come one day after a string of positive economic reports drove the stock market indexes up by 3-4% on Thursday.

Thursday's String of Positives Leads Wall Street To Good Friday

Today started with a story in the NY Times. According to sources close to the ongoing "stress testing" of the top 19 banks, the banks really aren't as stressed as many had feared.

The headlines that followed included a Wells Fargo report that this top-19 bank beat earnings numbers by posting more than $3B in profits in Q1. Net income was more than double the average estimate of analysts. Profitable business in housing investments contributed significantly to the jump.

Shortly thereafter, the government reported that initial claims for unemployment fell significantly. New filings fell by 20,000 applicants last week. The four week moving average for initial claims also began to fall.

Improving March retail sales reports came next. Retailers including J.C. Penney Co (JCP)
and TJX Companies [Marshalls, TJMaxx, HomeGoods, etc] (TJX) increased their Q1 forecasts reporting that March sales performed better than expected. Many other retailers also reported that their declining trend of the last several months now shows signs of brightening.

And as markets continued to move sharply higher, reports came in that Larry Summers, Barack Obama's economic policy leader said, "I think the sense of a ball falling off the table -- which is what the economy has felt like since the middle of last fall -- I think we can be reasonably confident that that's going to end within the next few months."

And the stock markets finished up strongly heading into the long Easter weekend.

More Real Estate Hope

We have now had a string of encouraging news on the housing recovery.

1. Sales of new homes were up 4.7 percent in Feb from Jan.

2. Sales of previously occupied homes went up 5.1 percent in the same period.

3. On Wednesday the Mortgage Bankers Association's latest weekly measure of loan applications climbed 4.7% -- their purchase index jumping 11.1%.

The rise in the purchase index indicates buyers are back taking advantage historically low mortgage rates and the first-time home buyer tax credit.

Sales at Wholesalers Rise

From Bloomberg: -- "Sales at U.S. wholesalers rose in February for the first time in eight months, contributing to a record drop in inventories that indicates distributors are well on the way to eliminating the glut in stockpiles."

"Sales rose 0.6 percent, the first increase since June, the Commerce Department said today in Washington. The 1.5 percent decrease in the value of stockpiles was the biggest since records started in 1992."

“Excess supply conditions don’t look as bad as they were,” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. “This is encouraging because it’s not just happening in wholesaling, it’s happening in the factory sector, too.”

Again the majority of economists were wrong, forecasting only a 0.7 drop at best.

Some bears had actually forecast inventories to rise.

"Today’s report showed stockpiles of durable goods, or those meant to last at least three years, fell 2.4 percent in February, the biggest decline on record. Durable sales climbed 2 percent, the most since April 2008."

Michael Englund, chief economist at Action Economics in Boulder, Colorado, wrote “By mid-year, we should be seeing a sizable pace of contraction in inventories relative to sales, which should pave the way for positive production figures by the second half of the year.”

The Silver Lining in Aluminum

Alcoa (AA) kicked off earnings season and by all measures struggled in the first quarter. No surprise. However, like many other businesses, it's clear that Q1 is a bridging quarter for a much better 2009.

The big story from the aluminum company's release is management's upbeat assessment of their business moving foreword:

"Alcoa responded swiftly to the declines in our end markets and the historic drop in aluminum prices with a holistic program that dramatically re-positions our balance sheet and operational cost structure," said Klaus Kleinfeld, President and CEO of Alcoa. "The result has been a rapid increase in liquidity during the quarter and significant operational cost savings. Besides putting us in a strong position to manage through this downturn, we now have the strategic and operational fundamentals in place for Alcoa to emerge even stronger when the economy recovers."

"Our operational measures are already beginning to bear fruit in all our businesses," said Kleinfeld. "In our Primary Products segments, for example, since the third quarter of 2008 we have reduced the cost of producing alumina and aluminum by 33 and 30 percent, respectively. Pacing well ahead of our 25 percent reduction target, we expect our efforts to have a significant impact on Primary’s profitability and cash flow in 2009."

“We launched operational and financial measures that will significantly improve our profitability and cash flow in 2009 and beyond. In fact, they have already begun to have an impact in the first quarter,” said Kleinfeld.

“We also see both near-term and long-term catalysts that should improve the prospects for the aluminum industry,” said Kleinfeld. “Current stimulus programs that target infrastructure and energy efficiency will create a demand for the unique characteristics of aluminum – lightweight, strong, durable, recyclable, and conductive. Longer term, the global megatrends of population growth, urbanization, and environmental stewardship will all drive demand for aluminum as the economy improves.”

10 Top Earners in each Segment will Fuel the Rally

As we enter the season when companies report their Q1 earnings, many assume that earnings for the first quarter of 2009 will be disappointing. But the reality is that currently the market is looking for news that is "not as bad as expected."

Earnings from these ten companies are likely to give a glimpse into the health of their segments. If their individual earnings are reported in line or better than lowered consensus estimates, their good fortune is likely to sustain the market's upward momentum -- particularly in their respective groups.

Retail - Walmart (WMT)
As we've seen, Walmart is leading the retail sector to recovery. Their sales have given no sign of slowing. As the largest retailer in the world, their should be no gloom and doom on the street if Walmart exceeds expectations again for the quarter. Walmart will announce their preliminary March sales this Thursday and their Q1 earnings on May 14th.

Banking - Citigroup (C)
Many believe that Citigroup is still a shakey firm -- that they still have not revealed all the toxicity on their books. But Citi’s CEO said last month that business was profitable in Jan and Feb. It is unlikely that March business was any different. If Citi releases a profitable first quarter it will provide a signficant boost to the financial group and the market in general.

Auto - Ford (F)
Despite the declines from a year ago, GM, Ford, Chrysler and Toyota all posted double-digit improvements from February. In Jan industrywide U.S. sales hit their lowest point in more than 27 years. But if conditions improve by another double digit bump in April, that could bode well for earnings prospects (less loss than thought) in the whole sector. Ford in particular is the only major U.S. carmaker that is coping without U.S. taxpayer money. Jim Farley, Ford's group vice president for marketing said last week, "We're getting more traffic. We don't have to close everyone with incentives." Ford execs say that the company has been restructuring over last three years and they are in a different position than others. If Ford, posts better than expected results, confidence that positive business restructuring is indeed possible in this troubled segment just may lift investor spirits.

Software - Microsoft (MSFT)
Microsoft is exposed to the tech industry probably more than any other single company. Since Microsoft has already given negative guidance for the year, an increase in any lines of its business -- PCs, servers, handsets, or applications may finally prove that this industry is not dead after-all.

Chips and Computers - Intel (INTC)
It is likely that the industry will look closely at what Intel sees as results for later in the year. Although profits were down during Q4, the street was more enamored by Intel statements of a firm second half. Should those management sentiments persist, look for computer stocks to continue to move higher.

Advertising - Google (GOOG)
Google's results are likely a perfect indicator of whether companies have decided to continue to advertise. If Google’s revenues and earnings are up, it likely means that companies aren't as bad off as the perma-bears would have us believe.

Internet Hardware - Cisco (CSCO)
Again Cisco's earnings will not be as important as its management's discussions on its views of the future. By earnings call time at Cisco, they will likely have a fairly decent view on how the broadband stimulus provisions will effect their ongoing business in the next 2-3 years. The discussions on massive new Internet build-outs will likely be quite positive and boost the internet hardware group.

Basic Materials - Dow Chemical (DOW)
Dow Chemical (DOW) because of its tremendous use of a wide variety of commodities, Dow will likely be a great barameter of general industry activity. If Dow’s revenues are above expectations, industrial activity is probably not as dire as many had predicted for Q1.

Telecom - Verizon (VZ)
Although the Q4 climate was obviously tough, "Verizon has shown that it is able to compete effectively in this economic environment," said Chairman and CEO Ivan Seidenberg. "We grew profits and maintained strong cash flows throughout 2008. In the fourth quarter, we continued to produce top-line growth, fueled by strong sales volumes for broadband, wireless and strategic business services." If Verizon continues this type of execution it Q1 2009, it will no doubt lead the telecom sector higher.

Online Sales - Amazon (AMZN)

Last quarter Amazon earned $225 million on revenue of $6.7 billion, up 18 percent from a year ago. Those results easily topped Wall Street estimates. Analysts had expected Amazon to outperform, but the magnitude is impressive. As more and more retail transactions move to an online modality, Amazon's success will nullify some of the shakeout of brick and mortor and high end retail softness in Q1.

It will be a quite interesting 6-8 weeks ahead. The swift and steep bull move is likely to continue.

This Week's Good News Headlines

(click on each headline for the full story)

Has Your Bank Failed? Probably Not.

Posted: Sun, 05 Apr 2009 03:53:00 +0000

The majority of Americans are now beginning to realize that the dire predictions of their local banks failing is just not materializing. 

Bank takes TARP Money; Saves Small Businesses

Posted: Sat, 04 Apr 2009 06:10:00 +0000

In recent weeks we've been hearing a lot about government plans to help banks stay safe, secure, liquid, and in business. But are those programs actually working? Yes they are. And here is a great story to illustrate.

Factory Orders Rise, Layoffs Fall

Posted: Fri, 03 Apr 2009 05:19:00 +0000

U.S. factory orders rose in February for the first time in seven months.  Layoff announcements by U.S. employers declined 19.3%.

Good News Headlines Everywhere

Posted: Thu, 02 Apr 2009 04:02:00 +0000

Good economic news seemed to be everywhere on Wednesday:

Media Negativity Moderates in March

Posted: Wed, 01 Apr 2009 03:48:00 +0000

The mainstream media has indeed moderated in its pursuit of only gloom and doom this month. 

Past the Inflection Point

Posted: Tue, 31 Mar 2009 05:12:00 +0000

We've most likely passed the inflection point, where the rate of decline starts becoming less and less. 

5 Vital Signs of Life

Posted: Mon, 30 Mar 2009 05:04:00 +0000

Let's start the week with a recap of last week's good news...

Has Your Bank Failed? Probably Not.

Mine has not either.

And the majority of Americans are now beginning to realize that the dire predictions of their local banks failing is just not materializing. For all the complaining about the government stepping in to help the banks, the reality is that the Fed's rescue plans are working. Treasury and Fed leaders seem to have structured the specific programs just about right.

In fact, I've recently seen bank billboards and signage like, "We are rock solid. Come inside and let us tell you why." or "We specialize in small business loans. Let us earn your trust." or "There is no credit crisis here." (Please send others to me as you see them.)

Bank failures last year and today are much lower than during other banking problems in recent memory. (Like the Savings and Loan Crisis)

Source: News N Economics (click to enlarge)

Additionally, according to the FDIC, no banks failed last week and according to Fed data, actual lending continues at record high.
Source: Calafia Beach Pundit (click to enlarge)

It is no wonder that consumer confidence is up and retail spending continues to improve.

Bank takes TARP Money; Saves Small Businesses

In recent weeks we've been hearing a lot about government plans to help banks stay safe, secure, liquid, and in business. But are those programs actually working? Yes they are. And here is a great story to illustrate.

At a time when so many small businesses are struggling to keep their doors open, two brothers are bucking the trend at their home and garden shop in Carmel, CA. Thanks in part to an influx of federal bank bailout money, Thompson and Beau Lange are actually using this time to expand and branch out.

The small business loan they received from First National Bank (FNB) is making that possible. And FNB is one of the local banks which received Troubled Asset Relief Program money. If it were not for TARP, FNB would not have been able to make a new business loan to the Langes. Without the loan, the brothers claim that they'd be "just 'hanging on' through this tough economy."

A $60,000 loan received in February from FNB saved the business and the jobs of its five employees. It also allowed them to sign a lease for expansion into a new garden store.

And other local businesses will benefit as well. As the business expands the home and garden shop will begin to carry patio furniture, fountains, pottery and orchids from the other local vendors.

So while the federal TARP money being loaned to banks has drawn criticism on some fronts, the Langes say those critics really don't see the bigger picture.

"The TARP money didn't just go to a bank," they say. "It will literally be spread throughout the community for products, supporting local businesses and their employees."

That is exactly what the stimulus money was intended to do.



(Thanks to reader Julie Cason for the tip on this story. Please keep those good news stories coming to good.news.econ@gmail.com)

Factory Orders Rise, Layoffs Fall

U.S. factory orders rose in February for the first time in seven months.

U.S. producers received $352.2 billion US worth of new orders in month two of 2009, an increase of 1.8 per cent month over month.

The majority of economists were wrong and had predicted a smaller gain.

Chart Source: Econoday

Better still, orders for non-defence capital goods moved up by 7.1 per cent.

On the employment front, Challenger, Gray & Christmas Inc. reported that the number of planned job cuts announced in March declined for the second straight month.

Layoff announcements by U.S. employers declined 19.3% from February's 186,350 job cuts, which was also down from the January layoff reports.

The March corporate downsizing figures were the lowest since October.
Chart Source: Calafia Beach Pundit

The flurry of recent good news has the stock market moving higher and Thursday was no exception.

Good News Headlines Everywhere

Good economic news seemed to be everywhere on Wednesday:

1. Toyota’s U.S. Sales Decline Less Than Forecast; Shares Surge (Bloomberg Full Story)
"Toyota Motor Corp.’s U.S. sales fell less than analysts predicted last month as the world’s largest carmaker offered near-record incentives to spur demand. The stock rose to the highest in almost five months."

2. Auto Makers See a Ray of Hope (WSJ Full Story)
"Despite reporting another major sales decline in March, auto makers expressed a rare bit of optimism Wednesday, saying they see signs the industry's downturn might be near bottom and a recovery could be starting."

3. The ISM Manufacturing index moves higher (Econoday Analysis Brief)
"The ISM's manufacturing index edged 5 tenths higher to 36.3 in March. New orders offers very good news as the index jumped more than 8 points to 41.2 in a reading that points to further improvement in durable goods orders. Backlog orders also improved as did employment while production held steady. Stocks pared losses in immediate reaction to the report, one which will build talk that the deepest part of the recession may be passing or may have already passed."
Our ISM Chart from last month graphs the trend line that is still on target for summer GDP growth.

4. Consumer, Investor Confidence at Six Month Highs (Rasmussen Full Story) The Rasmussen Consumer Confidence Index ended March at a level higher than the full month index reading for both June and July of last year. You'll remember that it is consumer confidence and retail sales that will drive 2/3 of this recovery.

5. Pending home sales up in sign of life for housing (Yahoo Full Story)
"Existing home sales rose 5.1 percent in February, the largest increase in nearly six years. Sales of new homes, meanwhile, rose 4.7 percent, and signed sales contracts for previously occupied homes rose 2.1 percent."

And of course the stock market in response continues it's swift and steep assent.