Friday, July 14, 2023

Markets hesitate after early bank eanrings

Dow went up 67, decliners over advancers over 3-1 & NAZ added 9.  The MLP index pulled back 3 to the 233s & the REIT index dipped 2+ to the 382s.  Junk bond funds fluctuated & Treasuries were sold, raising yields after their recent rise (more below).  Oil lost 1+ to the 75s following recent strength & gold declined 4 to 1959.

AMJ (Alerian MLP Index tracking fund)


 

 




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JPMorgan (JPM), a Dow stock, reported 2nd-qtr earnings that topped expectations, as the company benefited from higher interest rates & better-than-expected bond trading.  EPS rose to $4.75.  When excluding the impact of its First Republic acquisition in early May, a $2.7B “bargain purchase gain” from the gov-brokered takeover, as well as loan reserve builds & securities losses tied to the purchase, EPS was $4.37.  Revenue rose 34% to $42.4B as JPM took advantage of higher rates & solid loan growth.  Revenue gains were fueled by a 44% jump in net interest income to $21.9B, which topped the estimate by roughly $700M.  Average loans climbed 13%, while deposits fell 6%.  “The U.S. economy continues to be resilient,” CEO Jamie Dimon said.  “Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong.”  Dimon added that there were “salient risks in the immediate view” including dwindling consumer balances, the risk that interest rates would be higher for longer than expected & geopolitical tension including the Ukraine war.  JPM increased its guidance for 2023 net interest income (NII) to $87B, which is $3B higher than its guidance from May & the bank's 3rd increase to its NII forecast this year.  JPM's retail banking division was its main source of strength this qtr.  Profit surged 71% in the business to $5.3B on a 37% jump in revenue.  The stock rose 90¢.
If you would like to learn more about JPM,
click on this link:
club.ino.com/trend/analysis/stock/JPM_aid=CD3289&a_bid=6aeoso5b6f7

JPMorgan Chase beats analysts’ estimates on higher rates, better-than-expected bond trading

Citigroup (C) reported Q2 earnings & revenue that topped expectations.  Despite the beat, revenue fell 1% from a year ago as the decline in markets & investment banking businesses weighed on its results.  The uncertain macroenvironment & low volatility impacted client activity & market performance.  “Amid a challenging macroeconomic backdrop, we continued to see the benefits of our diversified business model and strong balance sheet,” CEO Jane Fraser said.  EPS fell to $1.33 from $2.19 last year, pressured by higher expenses, high cost of credit & lower revenue.  “Markets revenues were down from a strong second quarter last year, as clients stood on the sidelines starting in April while the U.S. debt limit played out,” Fraser said.  “In Banking, the long-awaited rebound in Investment Banking has yet to materialize, making for a disappointing quarter.”  On the bright side, revenue from personal banking & wealth management increased 6% in the qtr to $6.4B driven by strong loan growth.  Citi returned a total of $2B to shareholders thru common divs & share buybacks in Q2.  The stock fell 1.36.
If you would like to learn more about Citi,
click on this link:
club.ino.com/trend/analysis/stock/C_aid=CD3289&a_bid=6aeoso5b6f7

Citigroup posts better-than-expected earnings and revenue

The yield on the benchmark 10-year Treasury note rose 3 basis points to 3.789%, while the 2-year yield climbed over 7 basis points to 4.683%.  Yields move inversely to prices.  Investors were reacting yesterday to the Jun producer price index, which showed a weaker-than-expected monthly rise of 0.1% on both the headline & core metrics.  That followed Wed's consumer price index, which came in at an annualized 3% for Jun, below expectations & its lowest level since Mar 2021.  Fed officials have reiterated that the battle against inflation is far from over & the market is broadly pricing in a qtr-point interest rate hike at the central bank's next meeting later this month.

Treasury yields rise after two-day slide

Bank earnings are coming in underwhelming.  It's always difficult to understand them when so many numbers are reported which tend to give mixed signals.  Next week, some of the big corps will be reporting.  The Dow is at a roughly 15 month high & is struggling to keep its recent rally going.

Dow Jones Industrials

 






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