Stocks Drop After Banks Report Weak Earnings

Barry Adams
14 Jul, 2022
New York City

U.S. stocks trimmed losses in volatile trading after the wholesale price index jumped and bank earnings disappointed investors. 

The S&P 500 index declined 0.3% to 3,790.31 and the Nasdaq Composite index gained 0.03% to 11,251.90.

The volatile energy prices dropped after the release of the wholesale price report on the worries that the economy may slow down faster than estimated and the Middle Eastern nations may keep the elevated supply flowing.  

Futures of crude oil prices increased 15 cents to $96.45 and natural gas edged down to $6.67 a unit. 

The yield on 10-year notes increased to 2.96%. 

The producer price index soared 11.3% in June from a year ago and increased 1.1% on a monthly basis, the Bureau of Labor Statistics reported Thursday. 

On a monthly basis, the producer price index increased 0.9% in May and jumped 0.4% in April. 

Core producer price index, excluding food and energy, rose 6.4% in June. 

Banks were in focus after JP Morgan earnings disappointed investors and the largest bank suspended stock buybacks to preserve capital and lifted reserves for bad loans. 

JPMorgan Chase declined 3.5% to $108.00 after the bank said second quarter revenues increased 1% to $30.7 billion. 

Net income in the quarter fell 28% to $8.64 billion from $11.95 billion and diluted earnings per share fell to $2.76 from $3.78. 

Return on equity fell to 13% from 18% and return on tangible equity dropped to 17% from 23% a year ago. 

Morgan Stanley dropped 0.4% to $74.69 after the financial services company reported net revenues in the second quarter ending in June fell to $13.1 billion compared to $14.8 billion a year ago. 

Net income fell to $2.5 billion or $1.39 per diluted share compared to net income of $3.5 billion or $1.85 per diluted share for the same period a year ago.  

 

European Markets Drop 2% 

European markets extended losses on the worries of faster increase in interest rates and mixed earnings reports. 

The DAX index declined 1.9% to 12,519.66, the CAC-40 index fell 1.4% to 5,915.42, and the FTSE index dropped 1.6% to 7,039.81. 

The euro dropped to $0.99, the level last seen in 2002.   

Benchmark indexes dropped on the worries of rising inflation after the U.S. wholesale prices rose 11.3% stoking the fears of faster rate increases. 

The eurozone economic growth in 2022 was lowered to 2.6% from the previous estimate of 2.7% released three months ago, the European Commission said in its summer report on Thursday. 

The commission downgraded the outlook citing the surging inflation, ongoing China coronavirus challenges, and continued war in Ukraine. 

The estimate of the economic growth in 2023 was also lowered to 1.4% from the Spring estimate of 2.3%. 

Germany's growth outlook was lowered to 1.4% and 1.3% and France's estimate was lowered to 2.4% and 1.4% in 2022 and 2023 respectively. 

However, Spain's economy is expected to expand 4.0% in 2022 and 2.1% in 1.4% in 2023 and Italy's economy is set to grow 2.9% and 0.9% respectively. 

 

Asian Markets Ease On Rate Path Worries 

Market indexes in Asia declined on the worries of global economic conditions and rising inflation. 

The Nikkei 225 index increased 0.6% to 26,643.39, the Sensex index declined 0.2% to 53,416.15, and the Hang Seng index fell 0.2% to 20,751.21. 

Japan's industrial production fell more than initially estimated in May, the  Ministry of Economy, Trade and Industry said on Thursday.

Industrial production fell a seasonally adjusted 7.5% in May from the previous estimate of 7.2%.

Singapore unexpectedly lifted its key lending rate and the central bank revised higher its estimate of overall inflation to between 5.0% and 6.0%from the previous range of 4.5% to 5.5%.

India's trade deficit in June surged nearly three-fold to $26.2 billion from $9.2 billion a year ago. 

Exports in June soared 23.5% in June to $40 billion and imports soared 57.6% to $66.31 billion resulting in a trade deficit of $26.2 billion.