Dow Jones Industrial Average
fell Friday after major U.S. banks reported fourth-quarter earnings. The market did not seem to take the reports so kindly – and financial data also disappointed.
The Dow fell 327 points, or 0.9 percent, on Friday morning, after falling 176 points on Thursday to close at 36,113. The
fell 0.5% while the technology-heavy
̵[ads1]1; which fell 2.5% on Thursday when especially technology shares came under pressure – was down 0.2%.
JPMorgan Chase (ticker: JPM) reported earnings of $ 3.33 per share, beating estimates of $ 3.01 per share on revenue of $ 30.35 billion, above expectations of $ 29.9 billion. The bank released $ 1.8 billion in loan loss reserves, without which the company would have missed out on earnings estimates. The stock fell 5.9% after rising 5.7% for the month leading to earnings.
Wells Fargo (WFC) reported earnings of $ 1.38 per share, beating estimates of $ 1.13 per share on revenue of $ 20.9 billion, above expectations of $ 18.8 billion. The stock rose 3.3 percent. The stock was up 14.5% for the month leading to earnings.
The company cited “soft demand” as one reason why loan balances were lower. Although the company did not expand on this in its income statement, the markets do not want to see higher interest rates coincide with weakened loan demand.
Citigroup (C) reported earnings of $ 1.46 per share, beating estimates of $ 1.38 per share, with revenue of $ 17 billion, above expectations of $ 16.8 billion. The bank’s loans amounted to $ 668 billion, a decrease of 2.5 percent from the previous year.
Citi shares fell 2.5% after rising 9% for the month leading to earnings.
The markets also looked through economic data on Friday. Retail sales fell by 1.9% month-on-month in December, missing expectations of a 0.1% decline and falling sharply from an increase of 0.3% in November.
“While overall retail sales levels are high and still strong, the December blip is likely to be affected by consumers buying early, fearing well-published reports of supply and delivery concerns and retailers’ inability to deliver goods for Christmas,” wrote Jamie Cox, chief executive. partner for Harris Financial Group.
A sharp fall in retail spending seems very plausible. Core retail sales had an annual rate of nearly $ 420 billion in late 2021, according to 22VResearch. It is almost 25% higher than the trend before Covid, so in recent months it has fallen back down.
It is not a good idea for equity investors, but the markets will see if the weak retail sales results will be a problem for a broader economic growth, or if it means that consumers start to shift their expenses from goods to services, as the results have been. damaged by the pandemic.
“The retail sales were ugly, there’s no way around it,” said Cliff Hodge, chief investment officer at Cornerstone Wealth.
Industrial production fell 0.1% month-on-month in December, lower than the forecast of an increase of 0.3%.
The stock market is reflecting higher interest rates and less liquidity added to the markets from the Federal Reserve, which is now estimated to raise interest rates three times this year and reduce the size of the balance sheet at some point in the fight against inflation.
The fixed income market now reflects a 96% chance that the first increase will be in March, up from 90% just days ago. Citigroup economists wrote that the market expects three to four increases this year.
While interest rates across the board have already risen, the stock market may still reflect the risk of economic growth. The S&P 500 is 3.8% below the all-time high, reached earlier this month.
The Fed’s recent shift to tighter monetary policy “completes what is, frankly, the most violent hawkish” face “of Fed policy I have seen in my career,” wrote Tom Essaye, founder of Sevens Report Research.
It is no surprise that value stocks, largely more economically sensitive, underperform growth and technology names on Friday. The financial sector is hard hit – and the sector accounts for a large proportion of shares with large market capitalization.
Financial Select Sector SPDR
The Exchange-Traded Fund (XLF), which rose more than 4% for the year to Thursday, is down 1.4% on Friday. That is the reason
Vanguard S&P 500 value
ETF (VOOV) falls 0.6% as finance is the largest sector in the fund, and accounts for almost a quarter of the fund’s total market value.
But it was not just finances that did all the damage.
Without the gains in technology, the indices would have been noticeably lower. The
Invesco S&P 500 Equal Weight
The Exchange-Traded Fund (RSP), which weights each share in the index equally, was down 0.8%. It is worse than the regular index, whose movements are strongly influenced by companies with larger market values.
Overseas, the pan-European
fell 1% and Hong Kongs
Hang the Bed Index
ended 0.2% lower.
In the raw material area, crude oil prices continued to march higher. Futures for West Texas Intermediate oil rose 1.2%, topping $ 83 a barrel.
Cryptocurrencies were generally lower.
– the leading crypto-commodity – fell more than 3% in the last 24 hours to below $ 42,500, according to data from CoinDesk. Less peers
fell 3% simultaneously to around $ 3250.
– a “joke” token that has received high-profile attention from
Tesla CEO Elon Musk and others – increased by 14%; Tesla will start accepting crypto for item payments.
Here are seven stocks on the move Friday:
SAP (SAP) was up 1.7% after the German software group reported that revenues from the cloud computing business rose by 28% in the last quarter.
Modern (MRNA) and
Pfizer (PFE) fell 1.8%, 3.3% and 1.1%, respectively, after the Supreme Court blocked the Biden administration’s vaccine mandate for companies with 100 workers or more.
Boston Beer Co. (SAM) shares fell 9.5% after the company cut its earnings outlook.
Las Vegas Sands (LVS) jumped 13%; Shares in the casino giant have risen this week as some analysts see a brighter future for the stock in 2022 after a significant underperformance last year. Likemann
Wynn Resorts (WYNN), which faced similar pressure in 2021 – including regulatory concerns from China – rose 6.7%.
Write to Jacob Sonenshine at firstname.lastname@example.org and Jack Denton at email@example.com