With Easing Recession Worries and Earnings Optimism, Wall Street Extended Weekly Gains

Barry Adams
13 Jan, 2023
New York City

Benchmark indexes struggled in morning trading and bank earnings weighed on market sentiment but indexes rebounded in afternoon and extended weekly advance. 

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. 

Signals from international markets also supported the market advance after China's imports fell less than expected in December and the euro are industrial production rebounded. 

Investors awaited earnings from 90 companies next week including Netflix, Procter & Gamble, Goldman Sachs and Morgan Stanley, American Airlines and United Air and at least 30 small and mid-sized banks.  

 

S&P 500 and Nasdaq Extend Weekly Advance

Benchmark indexes struggled after the release of major bank earnings but sentiment improved after bond yields stayed muted and rate path worries and tech stocks rebounded. 

The S&P 500 index increased 0.4% to 3,999.09 and the Nasdaq Composite index increased 0.7% to 11,079.16. 

For the week, the S&P 500 index increased 4.8% and the Nasdaq Composite index rose 2.7%. 

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

Chinese policymakers also proposed a $67 billion plan to resuscitate property market and focus on 30 leading property developers without identifying names. 

Crude oil increased $1.53 to $79.93 a barrel and natural gas fell 21 cents to $3.48 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 4.24%, 10-year Treasury notes rose to 3.50% and 30-year Treasury bonds edged lower to 3.61%. 

 

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 High

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

Market sentiment was upbeat after the U.S. inflation moderated in December and China's international trade in December was ahead of expectations. 

Investors also turned positive after Chinese policymakers proposed a $67 billion 21-point action plan to help the leading 30 property developers and support the rebound in the moribund sector. 

The Euro Area trade deficit soared in November from a year ago but dropped to a 9-month low after exports expanded and imports fell sharply. 

Industrial production in the currency zone also rebounded 1.0% in November after contracting 1.9% in October and the production declined 2.0% from a year ago after falling at a faster pace of 3.4% in October. 

Moreover, Germany's economic growth slowed in 2022 and the UK's economy unexpectedly expanded in November. 

 

Euro Area Trade Deficit Expands 

The Euro Area trade deficit in November surged after imports rose at a faster pace than exports, Eurostat said in its latest monthly report. 

Exports rose 17.2% to