Dow Jones Futures Rise on JPMorgan Earnings Amid Banking Crisis; Boeing slips on 737 Woes
Dow Jones futures turned slightly higher early Friday, while S&P 500 futures edged lower and Nasdaq futures fell. JPMorgan Chase ( JPM ) boosted earnings, with Wells Fargo, PNC Financial and UnitedHealth’s earnings also topping the displays. Boeing skidded on the 737.
X
The stock rally rebounded sharply on Thursday after yet another slower-than-expected inflation reading, along with rising unemployment claims. The major indexes recovered Wednesday’s losses or more. The S&P 500 hit its best level in nearly two months, joining the Dow Jones. Nasdaq arranged a subsequent follow-up day.
Leading stocks had solid gains, but not many flashed buy signals.
Megacap stocks had a strong Thursday. apple (AAPL), Amazon.com (AMZN), Google parent Alphabet (GOOGL), Meta platforms (META), Microsoft ( MSFT ) and Tesla shares all rose more than 2%. Google shares rose back above a buy point. Apple shares and Microsoft rose within buy zones. Tesla ( TSLA ) and Amazon shares rose within bases that formed just below the 200-day moving average. The Meta stock hit an 11-month high.
Amazon is joining Microsoft and Google in the generative AI field, the e-commerce and cloud computing giant said Thursday. Tesla announced further price cuts in several markets on Friday.
The meta stock is on the IBD Leaderboard and SwingTrader. MSFT stock is on the IBD Long-Term Leaders.
Investors should take part in this market upturn. But large banking revenues are looming large.
Dow Jones Futures today
Dow Jones futures rose 0.1% relative to fair value, turning higher on JPM earnings. Boeing and UnitedHealth are also Dow components. S&P 500 futures edged lower and Nasdaq 100 futures fell 0.5%.
The Commerce Department will release retail sales figures for March at 8:30 a.m. ET. The Federal Reserve will report March industrial production at 9:15 a.m. ET.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Bank income
JPMorgan and Wells Fargo (WFC) topped earnings views Friday morning, with Citigroup (C) in print.
JPMorgan reported a slight increase in deposits at the end of Q1 compared to the end of 2022, as depositors rushed into the well-capitalized giant despite low savings rates. It raised its forecast for net interest income for the full year.
Wells Fargo reported stronger-than-expected net income, while deposits fell slightly.
Super regional PNC Financial Services (PNC) reported better-than-expected earnings in the fourth quarter, with revenue roughly in line. PNC deposits were flat. Net interest margins fell compared to the 4th quarter due to higher financing costs. But PNC cut the provision for credit losses.
JPM stock rose sharply with Wells Fargo and Citi up modestly. All are below key levels.
PNC stock was little changed early Friday, erasing strong initial gains. Shares rose 1.4% on Thursday, but after falling intraday to their worst level since November 2020.
Bank deposits have fallen for 10 straight weeks, according to Fed data, although smaller banks saw a slight increase in the past week. Fresh weekly figures will be published late Friday. Fears of bank failure have subsided, but deposit rates – especially in the largest banks – are still well below money market funds and short-term treasury bills.
If the banks have to start paying significantly more for deposits, net interest margins will come under pressure. That’s especially true for smaller banks, as depositors still seek safer havens in too-big-to-fail giants. Lower and more expensive deposits will also probably affect lending, and thus the economy. Bank loans started to fall in recent weeks.
Federal Reserve staff saw a “mild recession” later this year due to bank stress, according to the minutes of the Fed’s policy meeting on 21-22. March published on Wednesday.
Several other major financials are due next week, including Bank of America (BAC), Charles Schwab (BLACK), Goldman Sachs (GS) and Morgan Stanley (MS), as well as several regional and super regionals.
Boeing 737 production problem
Late Thursday, Boeing (BA) warned of lower 737 Max production and deliveries in the near term, citing a parts problem from a supplier, apparently Spirit Aerosystems (SPR). Analysts had expected Boeing to ramp up 737 Max production soon. The BA share fell 6 percent.
UnitedHealth revenues
Even before the opening, UnitedHealth Group (UNH) reported better-than-expected earnings and revenue in the first quarter, kicking off results for the health insurers. The Dow Jones giant raised its full-year EPS guidance slightly, roughly in line with Wall Street’s forecast.
The UNH share rose slightly in pre-market trading. Shares climbed nearly 1% to 526.21 on Thursday, moving toward a buy point of 558.20. UnitedHealth has rallied in the past two weeks as Medicare reimbursements are expected to rise. UNH stock has a buy point at 558.20, but is not far from a possible trend line entry. A break around the trend line may be welcome.
The UNH share has joined long-term leaders.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally rebounded from Wednesday’s downside, with the major indexes gaining momentum during Thursday’s session, closing near intraday highs.
The Dow Jones Industrial Average rose 1.1% in Thursday’s trading. The S&P 500 index rose 1.3 percent. The Nasdaq composite rose 2%. The small-cap Russell 2000 rose 1.3%.
U.S. crude fell 1.1% to $82.16 a barrel, pulling back from its best levels in nearly five months.
The 10-year government yield rose 3 basis points to 3.45%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55%. The iShares Expanded Tech-Software Sector ETF ( IGV ) jumped 1.9%, with ServiceNow and MSFT big holdings. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.8%.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 4% and ARK Genomics ETF ( ARKG ) 5.6%. Tesla stock is a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) climbed 2.2%, with the FCX stock a notable holding. The Global X US Infrastructure Development ETF ( PAVE ) rose 0.3%. The US Global Jets ETF (JETS) rose 0.2%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.4%. The Energy Select SPDR ETF (XLE) climbed 0.6% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.3%.
The Financial Select SPDR ETF ( XLF ) closed up 0.9%. JPM shares, Wells Fargo and Citigroup are all major XLF holdings. The SPDR S&P Regional Banking ETF (KRE) rose 1.5%. PNC bearing is a KRE component.
Top five Chinese stocks to watch now
Tesla’s price cut
Tesla announced price cuts in Europe, Israel and Singapore on Friday. The EV giant cut prices in several European markets, including Germany and France, for all versions of the Model 3, S and X, as well as the Model Y Performance. In early March, Tesla had offered significant discounts in Europe, but no official price cuts.
Tesla cut some Model 3 prices in Israel, while reducing Model 3 and Y price tags in Singapore.
Last week, Tesla cut US prices for all of its electric cars. It also reduced prices in Australia.
All of this follows sweeping price cuts worldwide in early January, which led to record first-quarter deliveries but also likely hit margins. The latest wave of cuts suggests that margins will come under further pressure.
Tesla earnings are due next week.
Tesla shares fell a fraction before the open. Shares on Thursday rose 3%, but it was an inside day, below all moving averages.
TSLA stock has a buy point at the 207.89 cup handle, but this entry is just below its 200-day moving average. Investors may want to wait for a decisive move above that key level.
Market rally analysis
The stock market rallied after Wednesday’s downside with an even stronger rise.
The Nasdaq led the way on Thursday. The technology-heavy index returned above the 12,000 level. It is close to March 31, with a peak in 2023 just above that. Volume rose slightly on the Nasdaq, giving the tech-heavy index an accumulation day after three distribution days in the previous five sessions.
The strong increase in higher price marked a subsequent follow-up day for the Nasdaq.
NYSE volume fell compared to Wednesday. Still, the S&P 500 rose above early April, topping out at its best level since mid-February, short of the 2023 highs. The Dow Jones retook the 34,000 level with the 2023 highs above it. The Russell 2000 moved above its 21-day line but is well below the 50-day and 200-day lines.
Winners beat losers by nearly 5-to-2 on the NYSE and Nasdaq
But despite the wide range and the major indices’ strong rise in price, there were not many shares that flashed buy signals.
Southern copper (SCCO) and Freeport McMoRan (FCX) showed bullish action, while ServiceNow (NOW) flirting with a breakout. STMicroelectronics (STM), HubSpot (HUBS) and Flywire (FLYW) all redeemed purchase points.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.8%, a decent gain but definitely trailing the S&P 500. And the RSP remains below its declining 50-day.
Megacap technologies were strong performers Thursday and have been throughout 2023. AMZN shares jumped 4.7%, reclaiming its 50-day line. Apple shares rose 3.4% while Meta gained 3%. Google shares rose 2.7% as the tech titan moved back above the buy point. The Microsoft share fell behind with a gain of 2.2%.
Breaking out to 2023 highs would be a big step for the market rally. Ideally, the breadth will continue to improve, with RSP gaining some ground on SPY.
Friday’s earnings reports, especially JPMorgan and other banks, could be big market moves up or down.
Time the market with IBD’s ETF market strategy
What to do now
Thursday’s action was a positive step for the stock market recovery, despite relatively few buying opportunities.
Investors can increase their exposure gradually, provided the market trends higher. It didn’t take much before the major indexes and leading stocks look damaged again.
The market remains in a sideways pattern, with sectors and individual names subject to large swings at times. Try to build a portfolio with positions in leading stocks from a variety of sectors or themes.
Be ready to take profits and cut losses quickly. Investors should always be flexible, but this is definitely not a time to be locked into a bullish or bearish mindset.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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