Market rises as Yellen testifies before Senate; JPMorgan shares rise; energy sector rises

By Stephanie N. Rotondo

Phoenix, Feb. 24 – Preferred stocks were again moving higher on Tuesday as Janet Yellen, the chairman of the Federal Reserve, told a Senate committee that the central bank was looking to be more flexible on its looming interest rate increase.

The Wells Fargo Hybrid and Preferred Securities index closed 25 basis points higher. It was up 15 bps at mid-morning.

The Fed will firstly drop the use of the word “patient,” a term used since December when the agency said it would take its time to raise rates.

Secondly, the Fed will adopt a “meeting-by-meeting” approach to the rate raise. Some market watchers are speculating that the hike – which was previously expected to occur around June – could be pushed back to October.

But while the market was firm, activity still remained subdued.

“Hopefully after we get past this testimony and stress tests,” activity in both the primary and secondary will pick up, a trader said.

JPMorgan Chase & Co.’s $1.38 billion of 6.125% series Y noncumulative preferreds, however, dominated trading, with about 1.79 million shares being traded.

The paper was also trading upward as the New York-based bank held its annual Investor Day.

The preferreds closed up 2 cents to end at $24.99. The 5.5% series O noncumulative preferreds (NYSE: JPMPD) rose 4 cents to $24.23, while the 5.45% series P noncumulative preferreds (NYSE: JPMPA) improved 7 cents to $24.25.

During the full-day meeting, Marianne Lake, chief financial officer, said that while the bank has no plans to cut itself into pieces – as has been suggested, given the company’s G-SIB risk level – it plans to cut $100 billion in large deposits by the end of the year in order to comply with the new capital requirement rules set to take place this year.

Additionally, the bank intends to shutter 300 stores over the next two years – 150 this year and 150 next year. The company said it was because more customers are moving to mobile banking options.

JPMorgan also plans to make $2.8 billion in cost reductions to its investment banking unit, bringing expenses down to $19 billion by 2017.

Current expenses are $23.3 billion, including $1.5 billion in legal expenses.

Oil names retain gains

In early trading, a trader said that “energy was moving up slowly,” as oil prices rallied.

He noted that West Texas Intermediate crude had “touched $50” earlier in the session.

Though oil prices eventually declined, the sector’s preferreds held on to their gains.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) finished up 21 cents at $23.00 per share, while Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were 40 cents, or 1.79%, better at $22.70.

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