Market briefing---Matt (slow)
Bear Stearns---Carmen (fast)
“world financial report.” i’m matt nesto. let’s we cap the day that was on wall street. another up day. two days and counting. the dow and the s&p both 1.1% high her. the nasdaq also on the up today. there it is. 1.7% higher. bear stearns says first quarter earnings were up 32%. that is nine consecutive―or nine profit―quarterly profit gains out of the past 10. like lehman brothers yesterday, bear stearns topped estimates as brokerage firms benefit from low interest rates and increased stock trading activity. carmen roberts has that story. carmen?
>> it was a story that was better than expected revenue and beyond that, analyst jeffery hart, he says it was a pretty solid quarter. bear sternings also gained from equity sales, investment banking and higher than expected fixed income revenue.
>> it is primarily because the fixed income business has not fallen off a cliff f. you look back three months ago, expectations for earnings this year verses ‘03 were down significantly. these companies now look like they will beat earnings this year verses last year’s earnings.
>> taking a look at the numbers. first quarter net income for bear stearns to $367 million, more than 50 cents above the average analyst estimate and more than the earnings a year ago. bear stearns is the seventh largest security firms and ranks number two as the mortgage-backed securities company. chief executive james cane has maintained the revenue in mortgage-backed bonds by selling secures with lower credit ratings and higher yields. fixed income sales and revenue had a net income of $822 million, up 4% from a year ago. bear stearns has been diversifying away from its demmed on bonds. and analyst paul hickey of birinyi and associates says he is positive on bear stearns.
>> money flows and the stock continues to show accumulation by investors on both retail and institutional and the mortgage market , as long as the fixed income market cons to rally, the mortgage market should continue to do well and that would be a positive.
>> analysts say the bear stearns and other bond traders will benefit while interest rates stay low.
>> clearly if interest rates were to move up dramatically, would be a negative for these stocks because it would shut off mortgage-backed security issuance and also corporate spreads verses treasuries have come down to very low levels. certainly a little bit of change increases that spread without the major negative for these companies. but if the spreads were to really blow out, that certainly would be a negative.
>> and the number of wall street economists who think the federal reserve will wait to raise interest rates is rising. the bloomberg survey shows that 10 of 23 economists say that rates won’t rise until 2005. in december, only six thought the fed would wait that long. matt, back to you.
>> ok, carmen. here’s some interesting headlines for you folks. the central bank in brazil has unexpectedly cut its benchmark interest rate by a quarter of a point. it is now 16.25%. i put a chart up here to show you where rates have gone in brazil. you can see from last june, they were up above 25%. but ding, ding, ding, ding, all way down now to 16.25%. clearly brazilian rates are a thing of amazement to those of us in the northern hemisphere, up above 40%, at least twice within the past decade. so, there we have it. that headline just crossing. no economist survaved by bloomberg expected that to happen today. well, morgan stanley will probably report a 17% gain in fiscal first quarter earnings when it announces results before the market opens tomorrow. for much of the past year, morgan stanley has depended on the fixed income markets for its profit growth. now revenue growth from underwriting bonds is starting to slow. meanwhile, morgan stanley’s equities businesses rebounding.
>> i think the equity underwriting, you are going to start seeing it this quarter. you’ll see more of it in the second quarter. but that tool kind of will gain momentum and accelerate as we go towards the end of the year.
>> the most striking regular coifer is in the firm’s investment banking business, which includes equity underrising and advising on mergers and acquisitions. revenue from stock underwriting, including i.p.o.’s more than doubled to an estimated $428 million from the same period a year ago. morgan stanley has become adviser in a long list of deals, including time warner’s sale of warner music, comcast bid for walt disney, amer sham’s purchase by g.e. and fleetboston’s sale to bank of america.
>> the biggest challenges right now are to keep the investment banking market share. you know? if you can keep that, you’re going to be the top of the game. you know, momentum builds more momentum. if you’re on all the tables the, you’ll get knocked on.
>> morgan stanley has done, that boosting its market share in mergers in recent months. the volume announced mergers in which morgan stanley was an adviser rose nearly sixfold to $179 billion in the latest quarter. a key indicator of revenues six months from now. for 2004, citicorps smith barney unit estimates revenues will double to more than $1.5 billion. lots of talk on brokers today and business for those investment banks by many measures has never been better. let’s take a look at the market performance for the stocks. a couple of standout names, at least over the one-year period. ameritrade and e-trade clear lift leading the track. the one-year laggardses, bear stearns up 39%. raymond james, lehman brothers, but also year-to-date the winning firms, again, lehman and bear leeting the way year-to-date. the five-year picture is all about lehman brothers and bear stearns, dominating the amex broker-dealer index. the top three performers of the 12 stocks that make that up. our next guest follows the global fixed income market . we’ll talk to jack malvey from lehman brothers. he will tell us why he is recommending shorter end maturity bonds. that’s up next.
