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US stock market daily report (May 01, 2013, Wednesday)
In a report on Wednesday, the Chicago Mercantile Exchange - the largest U.S. futures exchange - said they will take steps to close a loophole in its trading system that could be giving high-frequency traders an advantage. CME announced plans to make additional upgrades to its operations by the end of 2013. Traders are using powerful computers to trade through the Chicago Mercantile Exchange’s computer systems before other investors in the market. High-speed traders have the advantage of a fraction of a second before the rest of the market and are trying to profit from that. The Chicago exchange operator said it is “continually making improvements to our trading platform to increase efficiencies” and its goal is to ”bring variability as close to zero as possible.”
On Wednesday, NYSE Euronext (NYX) CEO Duncan Niederauer urged regulators and Securities and Exchange Commission to conduct a thorough review of the expansion of dark pools. Dark pools are are trading systems that are not openly available to the public where buyers and sellers submit orders anonymously. "Off exchange dark trading is at record levels, deteriorating market quality for all issuing companies," Niederauer told a SEC advisory panel on small businesses. "Less liquid stocks such as small companies tend to have a higher percentage of volume trading away from an exchange." Niederauer added that it was time to do a "meaningful" two-year long pilot program with 300 to 500 companies involved that widens the minimum one-penny spread increment that is used to trade securities. "If we did it it should change the economics from the banks point of view and improve liquidity," he said.
Ally Financial Inc. - 74% owned by the U.S. government - reported a $900 million gain on the sale of its Canadian operations, while core pre-tax income for Q1 also climbed and profit of $1.1 billion versus a profit of $310 million in same period for 2012. Ally 's core auto-lending business posted an operating profit of $343 million in Q1, up 42% from a year ago period in 2012 but, down 7.5% from Q4. Insurance unit reported an operating profit of $61 million, down 39% from a 2012 year ago period but, more than double the $27 million in operating profit reported in Q4. Mortgage unit for Ally reported an operating loss of $6 million versus income of $63 million in same period in 2012. Core pre-tax loss, which reflects continuing operations before taxes and certain expenses, was $6 million compared with income of $111 million a year ago. Excluding repositioning items mainly related to the sales agreements for Ally Bank's mortgage servicing rights, the company reported core pre-tax income of $207 million. Chief Executive Michael A. Carpenter said the majority of Ally's international businesses have been sold and the company received more than 70% of the total expected proceeds. Ally, a government controlled auto lender - generally finances vehicles from General Motors and Chrysler Group dealers and customers - after receiving $17.2 billion in funds through the Treasury Department's Troubled Asset Relief Program during the financial crisis. As of May 15, Ally will have paid nearly $6.1 billion to the U.S. Treasury, an amount that includes interest and dividends.
IntercontinentalExchange, Inc. (ICE) - global markets and clearing house operator - reported Q1 net income fell to $135.4 million or $1.86 earnings per share, from $147.8 million or $2.04 earnings per share in same period 2012. Revenue reportedly dropped to $351.9 million from $365.2 million. Jeffrey C. Sprecher ICE Chairman and CEO said, "As we continue with the regulatory approval process for the acquisition of NYSE Euronext, we are advancing our integration plans while focusing on opportunities to grow and serve customers across all of our markets globally." ICE shares were higher by nearly 4% into early afternoon trading session on Wednesday.
Ford Motor Co. (F) reported on Wednesday, a 17.9% increase in U.S. vehicle sales for April to 212,584 units, from 180,350 vehicles in same period of 2012, for the best monthly results since 2007. Ford said car sales rose 21.2% to 78,513 units; utility vehicle sales rose jumped 16.5% to 59,089 and truck sales increased 15.6% to 74,982. The company's largest brand - Ford - saw sales rise 17.8% to 204,969. The best-selling Ford car was Fusion with 26,722 units sold and Ford F-series truck rose 24.4% to 59,030.
General Motors Co. (GM) reported an 11% rise in April U.S. vehicle sales on Wednesday. For the month of April, GM sold 237,646 trucks and cars, for a seasonally adjusted annual rate of sales at 15 million. Cadillac sales were up 34% from 2012, leading the increase and GMC sales rose by 6.7%.
MasterCard Inc. (MA) reported Q1 profit increased 12.3% as spending on its credit and debit cards rose 10.5%. Earnings came in at $766 million or $6.23 per share, up from $682 million or $5.36 per share in 2012 period. Higher rebate and incentive payments it makes to clients for agreement renewals and meeting volume goals offset revenues. Driven by a 12% increase in processed transactions and 16% increase in cross-border volume, revenue increased 8.4% to $1.91 billion. Purchase volume had grown 13% on a local-currency basis in Q4 with customers making $690 billion in purchases, using MasterCard's, in Q1, up 10.5% on a local-currency basis from 2012.
Federal Reserve’s interest-rate decision
The following is the text of the Federal Reserve’s interest-rate decision Wednesday:
Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2% objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4% and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2%, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2% longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.
The Institute for Supply Management index released on Wednesday shows a drop to 50.7% from 51.3% in March. As the industry's rate of growth decelerated to the lowest pace since December, U.S. manufacturers showed minimal expansion during April. The ISM new-orders gauge rose to 52.3% from 51.4%; production index climbed to 53.5% from 52.2% and employment gauge sank 4 percentage points to 50.2% for the lowest level since November 2012.
Automatic Data Processing Inc. on Wednesday morning reported that private-sector employment growth slowed down in April, with the economy gaining only 119,000 jobs.
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