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US stock market daily report (January 31, 2013, Thursday)

Contributed by Millennium Traders

On Thursday, Europe's largest bank by assets, Deutsche Bank AG posted a shocking loss of $2.94 billion for Q4, the loss due in part to excessive leverage at the bank. The bank reported a net loss of 2.17 billion Euros compared with a profit of 147 million Euros in 2011 and for the full year, net profit was 611 million Euros, down from 4.13 billion Euros. Net revenue rose 14% to 7.87 billion Euros from 6.90 billion Euros. Co-Chief Executive Anshu Jain said the charges "relate to developments in regulatory investigations and adverse court rulings which you are all familiar with," but didn't elaborate further. While Deutsche Bank did not require a bailout from the German government, it probably didn’t recognize losses in it its portfolio. Former Deutsche Bank officials told investigators that the bank hid losses from the public ranging from $4 billion and $12 billion. Deutsche Bank is writing down the value of assets on its books now and it is time, to face the music. Deutsche said its underlying performance was improving and plans to keep the 2012 dividend remained unchanged. The bank said it is on track for a Core Tier 1 capital ratio of 8.5% - a key measure of a bank's financial strength made of only top-quality capital such as equity and retained profit - by the end of March. At the end of 2012, Deutsche had reached 8% ratio, a goal it originally targeted as a 'minimum' for the end of March. Jain called the improvement the "fastest organic Basel 3 capital formation of any peer in 2012." Deutsche Bank AG is among the banks that are under official investigation for allegedly rigging interbank benchmark rates, including the London Interbank Offered Rate. The bank remains involved in numerous legal disputes on both sides of the pond, including the decade-long legal battle in the 2002 bankruptcy of Germany's Kirch Media Group. The bank announced a reduction in jobs to the tune of 2,000 positions which will be vacated.

In a letter on Thursday to Federal Reserve Chairman Ben Bernanke and another regulator, Democrats Sen. Elizabeth Warren and Rep. Elijah Cummings are seeking documents about their mortgage settlement with large banks over foreclosure abuses stemming from the so-called robo-signing scandal. "It is critical that the OCC and the Federal Reserve disclose additional information about the scope of the harms found to establish confidence in the sufficiency and integrity of the settlement," Warren and Cummings said.

On Wednesday, the U.S. Justice Department filed an antitrust lawsuit challenging Anheuser-Busch InBev (BUD) $20.1 billion deal for the remaining stake in Grupo Modelo SAB, in which the firm does not already own. Justice argued that it would "substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose."

The Commerce Department reported on Thursday that personal income rose a seasonally adjusted 2.6% in December, for the fastest pace in eight years. Real after-tax incomes rose 2.8% during December, striking the largest increase since May 2008. During December, consumer spending rose 0.2%. Personal savings rate rose to 6.5% of disposable income, from 4.1% in November, for the highest savings rate since May 2009. A more accurate gauge of inflation than the better-known consumer price index per Fed officials, the personal consumption expenditure index was flat on the month.

Reports on Thursday showed the Chicago purchasing managers index rose to 55.6% in January, to mark the best performance in nine months. Advancing to 58.2% from 50.4% in December, new orders posted the biggest increase in 10 months; production index surged to 60.9%; employment jumped to 58.0% while other regional factory surveys were weak in January.