Stocks On Pause After Mixed Earnings from Major Banks and Recession Worries

Barry Adams
13 Jan, 2023
New York City

Benchmark indexes struggled in morning trading and bank earnings weighed on market sentiment. 

Popular indexes traded lower after Citigroup and Wells Fargo increased loan loss provisions and JPMorgan Chase and Bank of America forecasted mild recession. 

Market sentiment recovered slightly after two hours of trading and investors shrugged aside the recession worries and tech stocks advanced.  

The US consumer sentiment index tracked by the University of Michigan rose to 64.6 in January 2023 from 59.7 in December 2022, the highest since April. 

The forward looking annual inflation expectation in January receded to 4.0% from 4.4% in December. 

 

U.S. Indexes 

Benchmark indexes are set to close higher for the week and the Nasdaq index is up 3.5% and the S&P 500 index 1.5% so far. 

The S&P 500 index fell 0.1% to 3,979.10 and the Nasdaq Composite index increased 7.94 points to 11,009.04. 

Energy markets lacked direction but optimism prevailed on the hopes of higher global demand after Chinese business activities picked up and travel season gained momentum ahead of the Lunar New Year. 

Crude oil increased $1.11 to $79.51 a barrel and natural gas fell 9 cents to $3.60 a thermal unit. 

U.S. Treasury bonds traded nearly unchanged and investors reviewed cautious comments from large banks.

The yield on 2-year Treasury notes increased to 4.16%, 10-year Treasury notes rose to 3.53% and 30-year Treasury bonds edged lower to 3.57%. 

 

U.S. Stock Movers 

Wells Fargo declined 1.9% to $42.07 after the bank reported a plunge in earnings and the bank set aside higher reserves for credit losses and higher settlement costs linked to mortgage loan practices. 

Wells Fargo fourth quarter revenue declined 6% to $19.6 billion and net income plunged 57% to $2.8 billion from $5.7 billion and earnings per share fell to 67 cents from $1.38 a year ago.

Citigroup fell 0.6% to $48.81 after the bank increased reserves to cover loan losses. 

Citigroup said fourth quarter revenue increased 6% to $18 billion and net income fell to $2.5 billion from $3.2 billion and earnings per share decreased to $1.16 from $1.46 a year ago.

Bank of America Corp declined 1.5% to $33.95 after the bank reported nearly flat earnings. 

BofA said fourth quarter revenue rose 11% to $24.5 billion and net income edged up to $7.1 billion from $7.0 billion and diluted earnings per share increased to 85 cents from 82 cents a year ago.

JPMorgan Chase & Company increased 0.2% to $139.80 after the bank reported higher-than-expected revenue and earnings. 

JPMorgan said fourth quarter revenue rose 18% to $34.5 billion and net income increased 6% to $11 billion or $3.57 a diluted share.

Wipro Ltd declined 2% to $4.76 after the tech services providers from India reported weaker-than-expected earnings. 

Wipro Ltd said December quarter revenue rose 14.4% to 2?3,200 crore and net income increased 2.8% to ?3,050 crore or ?5.57 a share. 

Attrition rate for the last twelve months fell to 21.2% in the December quarter from 23% in the previous quarter.

 

European Markets Close at 9-month Highs 

European market indexes closed at 9-month highs and investors searched for bargains among beaten down stocks.  

The DAX index increased 0.4% to 15,114.08, the CAC-40 index rose 0.8% to 7,030.58 and the FTSE 100 index advanced 0.8% to 7,852.90. 

The region's currencies continued to advance on the hopes that the U.S. rate hikes may slow.

 The Federal Reserve is likely to raise rates by 25 basis points at the next policy meeting after raising rates by 75 basis points in a row followed by the last 50 basis points rate increase.  

The euro edged higher to $1.082, the British pound inched higher to $1.2206 and the Swiss franc advanced to 92.65 U.S. cents. 

The yield on 10-year German Bunds declined to 2.13%, French bonds fell to 2.60%, UK Gilts to 3.33% and Italian bonds to 3.96%. 

Energy prices continued to decline in the region amid mild weather conditions and elevated natural gas storage.  

Brent crude oil rose 86 cents to $84.89 a barrel and Dutch TTF natural futures contract price edged lower 2.9% to