Trader Talk

Data does little to dispel doubts about the economy, or make Yellen a hawk

Trader on the floor of the New York Stock Exchange.
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Markets were treated to a plateful of U.S. economic data on Tuesday. As usual, the offerings were mixed: the New York Empire survey beat expectations, but June retail sales disappointed—but there was an upward revision to the prior month.

Bank of America/Merrill Lynch reportedly raised its second quarter gross domestic product (GDP) forecast to 3.2 percent to 3.6 percent on the retail sales figure.

Meanwhile, people were expecting a moderately hawkish tone from Fed Chairman Janet Yellen in her .

Yellen hawkish? Forget about it! Yellen has never indicated that she would be more hawkish, and seems to have re-iterated this in a New Yorker interview. "And so even when the headwinds have diminished to the point where the economy is finally back on track and it's where we want it to be, it's still going to require an unusually accommodative monetary policy," the magazine quoted her as saying.


1) Bank earnings were strong. It's not just that JPMorgan, Goldman Sachs and Comerica reported earnings above expectations, continuing the string started by Wells Fargo and Citigroup. It's that all three noted business was better.

In the earnings release, JPMorgan CEO Jamie Dimon saw "strengthening pipelines in our commercial and business banking segments, and some improvements in markets activity...Consumers, middle market companies and corporations are in increasingly good financial shape and the labor market is showing steady improvement."

Goldman cited improving investment banking (M&A, restructurings, etc.), and investment management (mutual funds, private investment funds), which offset weaker trading activity.

However, the most interesting report was perhaps from Comerica (CMA). In a way, CMA is the opposite of Wells Fargo's report from Friday. Wells is primarily a community bank: they lend to individuals in the way of mortgages, auto and personal loans. Comerica is primarily a business bank: more than 70 percent of their revenue is commercial loans, lines of credit, foreign exchange management, and loan syndication services to middle market businesses.

CEO Ralph Babb said, "We attribute these results to continued improvements in the economy, reflected particularly in the loan growth in Texas and California."

2) Everyone agrees revenue growth has been disappointing, but Wolverine Worlwide, which makes well-known footwear (think Patagonia, Merrell, Hush Puppies, Keds, Saucony), was a real letdown. While they affirmed full-year guidance, they lowered full year revenue guidance to $2.77 billion, from a previous range of $2.77 to $2.85 billion.

CFO Don Grimes sounded a somber note when he said that the company has "taken a somewhat more conservative approach to our revenue outlook, reflective of a continued soft retail environment in the U.S."