Earnings season starts with a tough bang
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Major Moves
The autumn season started today with announcements from two major financial institutions – JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC) – and the reactions couldn't be any different. 19659003] The JPMorgan stock market went higher on the opening bell – opened at the highest level in 2019 – and continued to climb higher throughout the day and closed at $ 111.21. Wells Fargo shares, on the other hand, tried to climb higher in early trading, but ended up pushing under $ 47.50 key support to close the $ 46.49 day.
So what was the difference? Both companies beat their earnings expectations – with JPMorgan, the consensus estimates at $ 2.35 with $ 0.30 per share and Wells Fargo estimates the consensus estimate at $ 1.10 with $ 0.10 per share. However, the earnings are backward numbers. While these numbers are important, investors tend to care more about what the company will do in the future than it has done in the past.
That's why Wells Fargo's CFO John Shrewsberry is a downgrade of the bank's net moving forward interest rates so disappointing. Investors had expected the bank to forecast net interest income somewhere between a 2% contraction and a 2% growth in 2019. Instead, Shrewsberry said the bank expects a contraction of somewhere between 2% and 5%. It appears that a flat yield curve and rising deposit rates – driven by banks competing with each other to attract new customers – are primarily due to expected contraction.
Investors responded to this news of an expected contraction by selling shares of Wells Fargo. JPMorgan, on the other hand, was able to attract new investors to the strength of its consumer and community centers and a rise in investment bank profits. The increase in JPMorgan purchases took the stock back to $ 112 resistance level as it had previously established in November and early December 2018, before the bear market withdraws at the end of the year.
Although Wells Fargo did not climb higher today, JPMorgan's strength is a good sign for the rest of the big banks in the financial sector that are going to report revenue next week. S & P 500
S & P 500 established a new high in 2019 by climbing to 2,910.54 in early trading, but it didn't do much after that, and pulled back a little at a close price of 2,907.41. While there is no major upside, the fact that the index has been resilient enough to continue to climb slowly is a positive sign that traders are still cautiously adding the equity portion of their portfolios.
However, not everybody was praising Wall Street today. The health and care sector continued its decline as Anthem, Inc. (ANTM) pushed 8.48% and UnitedHealth Group Incorporated (UNH) fell 5.18% – part of its biggest two-day sales in 10 years – today in the wake at Bernie Sanders
Netflix, Inc.'s (NFLX) share also fell 4.49% on the Walt Disney Company (DIS) announcement, it will launch Disney +, its own streaming video service, at a price of just $ 6, 99 per month. This can be a major threat to Netflix, which has consistently increased the price of its monthly service.
Risk Indicators – VIX
The CBOE Volatility Index (VIX) confirmed the bullish relationship that seems to be permeating Wall Street these days as it closes right at low for the day: 12.0. This is an excellent sign that while investors are still a bit cautious when adding their bullish stock positions, they are not cautious about insuring their portfolio of protective put options on S & P 500.
Usually, investors buys more put options – which increase in value when the underlying asset experiences a fall in prices – on the S&P 500 when they are nervous about the index falling in the future. They hope that the increase in the value of the pillows will compensate for some of the losses they may experience in their stocks.
This increase in demand for the pillow options pushes both the price and the implied volatility levels for sets higher. This results in VIX – an implied volatility index based on S & P 500 put and call options – to move higher as well.
Conversely, when investors are not concerned about the S & P 500 moving lower, they tend to buy fewer pillow options on the index. This decline in demand usually pushes both the price and the implied volatility levels of the cushions lower. As a result, VIX also moves lower.
Seeing VIX close to its lowest level since October 3, 2018 is an encouraging sign that investors believe this can be a boom property season for the US stock market. [19659018] Bottom Line – Just Opening Salvo
Although it may be tempting to think of today's price action on Wall Street guarantees us a good earnings season, it's too early to make the claim. Today's bullish earnings figures from JPMorgan and Wells Fargo were merely opening salaries in a month-long process. Look for more volatility ahead.
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