Oil Futures Are Up On Libya, Disappointing OPEC Statements

One of the delegates to the informal OPEC consultations about oil output, speaking anonymously, has stated that OPEC is not likely to increase production.  "There have been consultations and we don't see a need to meet at the moment."  This is in line with statements made by Mohammad Ali Khatibi, the current OPEC governor, who has said "There is no shortage in the market."  Based on figures in the article, he may by right;  Libya normally pumps around 1.6 million barrels per day, but two-thirds of that production has been shut down (a loss of about1.06 billion barrels per day).  The article notes that Saudi Arabia has increased its own output to 9 million barrels per day, which is almost 1 million barrels per day above its OPEC target.

 

Nevertheless, the statements are disappointing commodities traders.  The Brent crude oil futures were up $1.31/barrel to $114.37 as of 8:40 AM EST on the statements, as well as on the Libyan attack on rebels in Zawiyah (which holds one of the largest refineries in Libya).

 

Speaking of Iran, the International Atomic Energy Agency issued a joint statement that "the door remains open" for development of nuclear power, as long as they cooperate  with the IAEA and do not attempt to pursue a nuclear weapons program.

MBA Weekly Applications Survey

The Mortgage Bankers Association has released its Weekly Application Survey, which is a look at the rate of change in applications for mortgages for both initial purchases and refinances.  In and of itself, this is not a huge market mover.  It can give some indications about the direction of New Home Sales and Existing Home Sales, as well as some indications about the health of lending agencies, so it is watched by people with an interest in real estate or the financial sector.

 

The results of the survey for the week ending 2/25 were not great.  The Market Composite Index showed a 6.5% decline, the Purchase Index showed a 6.1% decline, and the Refinance Index showed a 6.5% decline.

 

Turning to the MBA press release for the week ending 3/4, things have substantially improved.  The Market Composite Index has increased 15.5%, while the Purchase Index increased 12.5% and the Refinance Index increased 17.2%.  Refinance applications represented 65.5% of total mortgage applications for the week (an increase from the previous week's 64.9%), while adjustable-rate mortgages represented 6.0% of total mortgage applications for the week (an increase from the previous week's 5.5%).  The average interest rate for 30-year fixed-rate mortgages also increased from last week's 4.84% to this week's 4.93% (which is consistent with the increased demand for mortgages).

Redbook

The final bit of economic data for the morning is the Redbook, a weekly measure of sales at chain stores, discounters, and department stores conducted by Johnson Redbook Service.  Although the methodology is different, it tracks similar sorts of information to the ICSC-Goldman report.  Also, much like the ICSC-Goldman report, it is not considered a major market mover and is not available directly from the source without a paid subscription.

 

Econoday is reporting that year-over-year sales have slipped from a 3.0% year-over-year increase the week ending 2/25 to a 2.0% year-over-year increase for the week ending 3/5.

Morgan Stanley May Shed "Smith Barney" Name

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View this article on our website: Morgan Stanley May Shed 'Smith Barney' Name

Morgan Stanley May Shed 'Smith Barney' Name

Article published on March 8, 2011

Morgan Stanley is considering dropping the name “Smith Barney” from the marquee of its giant retail brokerage, people familiar with the matter tell Dow Jones Newswires.

Morgan Stanley Smith Barney recently asked clients to choose from six potential new names for the wirehouse. None of them include “Smith Barney,” the name of the legacy brokerage that became part of Morgan Stanley’s wealth management unit in June 2009 when Citigroup sold its rival a majority stake.

The possible new names include Morgan Stanley Advisors, Morgan Stanley Private Wealth Advisors, Morgan Stanley Global Wealth Advisors, Morgan Stanley Wealth Advisors, Morgan Stanley Wealth Management and Morgan Stanley Global Wealth Management. The “global wealth management” version was the name of the unit prior to the joint venture with Smith Barney.

A Morgan Stanley spokesman declines to comment on a potential name change but says the firm regularly surveys clients about its brand. He tells Dow Jones he “wouldn't read a whole lot into this.”

A spokeswoman for Citigroup declines to comment.

However, many of the joint venture’s financial advisors, as well as outsiders, are said to have expected an eventual rebranding of the brokerage, Dow Jones reports. They say a change would highlight Morgan Stanley’s anticipated move to full ownership of the wealth management business in about three years.

Morgan Stanley bought a controlling stake of 51% in the joint venture in 2009, leaving Citigroup with 49%, in a sale forced by the 2008 financial crisis. In May of 2012, Morgan Stanley retains the option of buying another 14% of the joint venture, to be followed by 15% in 2013 and 20% in 2014.

Morgan Stanley CEO James Gorman said in November that the bank planned to act on its option to purchase the outstanding stake in Smith Barney, Dow Jones repots.

Aite Group research director Alois Pirker says it isn’t unusual for a brokerage to move to simplify its name following a merger or other change in control. However, he doesn’t believe “a year or two” is sufficient to “wipe away that memory.”

Pirker tells Dow Jones that he doesn’t expect a name change alone will cause legacy Smith Barney advisors to head for the exits. But it could stir a “psychological issue” for some, who may see it as the “tip of the iceberg” for more change if they were already thinking about moving to a competitor, Pirker said.

Indeed, a Morgan Stanley Smith Barney advisor working in the southeastern U.S. tells Dow Jones that a number of his Smith Barney legacy colleagues could consider a rebranding of the joint venture as the final blow to their former firm, wiping out hope that its legacy might continue.

By Kathleen Laverty

  To read the Dow Jones Newswires article cited in this story, click here if you have a paid subscription.

ICSC-Goldman Store Sales

We move now to major retail chain store sales, with the International Council of Shopping Centers-Goldman Store Sales report.  This is a look at weekly and year-over-year changes in comparable store sales  at major retail chains only, accounting for about 10% of total retail sales.  Because of the limited scope of the report, this is not in and of itself a major market mover.  At best, it can be considered an indicator of overall economic activity.

 

Since the ICSC requires a paid subscription to access the report directly, the data is provided second-hand (in this case, from Econoday).  For the week ending 3/5/2011, sales were up 2.3% for the week and 2.6% year-over-year.  The weekly sales are a substantial improvement (2/25 had them down 0.5%), but the year-over-year sales are slightly disappointing after last week's 3.3% increase.

NFIB Small Business Optimism Index

This is the National Federation of Independent Business' Small Business Optimism Index, a survey of NFIB members on topics including employment, capital spending,  inventories, credit conditions, sales, and economic expectations.  This is not considered to be a major market mover, since small businesses are rarely listed companies.  This is not to say that small businesses are unimportant to the economy, however.  According to the US Small Business Administration, small businesses:

• Represent 99.7% of all employer firms
• Employ just over half of all private sector employees
• Pay 44% of total US private payroll
• Have generated 64% of net new jobs over the past 15 years
• Create more than half of the nonfarm private gross domestic product (GDP)

So, even though this report may not be directly a major market mover, small businesses have a significant impact on the overall economy of the US.

 

According to the NFIB, the overall optimism index gained 0.4 in February, rising to 94.5.  15% of respondents reported unfilled job openings (up 2 points from January) - something that could indicate that unemployment will drop[1].    17% (up 5 points from January) of respondents plan to increase employment over the next three months, while only 6% (down 2 points) plan to cut jobs.

 

[1]  Unfilled job openings can be an indicator that there are more jobs than potential employees.

Consumer Sentiment

Given all of the international excitement, one burning question fills the hearts and makes sleepless the nights of the average broker:  How is the American consumer taking the news?  Well, maybe I exaggerate.  But it is an interesting question.

 

For January, the Consumer Sentiment Index came in at 74.2, which beat expectations (but was lower than December's results).  The Consumer Expectations Index rose to 69.3, and the Current Conditions Index fell to 81.8.  The Econoday-surveyed analysts are expecting a new level of 75.1.

 

Now, turning to the University of Michigan for the report (cheerfully titled "Improved Job Prospects Trump Rising Prices"), we get a fairly sunny picture.  The Consumer Sentiment Index rose to 77.5, the Consumer Expectations Index rose to 71.6, and the Current Conditions Index rose to 86.9.

 

Interestingly enough, the Consumer Sentiment Index moved along household income lines.  It was up 9.7% among households with incomes above $75,000, but fell 1.4% among lower income households.