U.S. Stocks and Bond Yields On Hold With Earnings In Focus

Barry Adams
18 Apr, 2023
New York City

Stocks on Wall Street lacked direction and investors remained firmly focused on the latest batch of earnings. 

With the recent turmoil in the regional banking sector, earnings from regional banks were closely watched and large banks were pored over for clues about consumer spending. 

Bank of America sharply lifted its estimate of loan losses and Goldman Sachs revenue fell on the weakness in investment banking and fixed-income and commodities trading.  

Commodities prices attempted a rebound after China reported better-than-expected growth in the first quarter. 

China's GDP rose at an annual pace of 4.5% in the first quarter, a rebound from 2.9% in the fourth quarter, the National Bureau of Statistics said Tuesday. 

The stronger-than-expected rebound was in part driven by additional stimulus provided by the Chinese government for infrastructure projects. 

Economists in China were anticipating the GDP to expand at 4.0% and the faster rebound raised hopes that the world's second largest economy may exceed the 5.0% growth target set by the government in 2023. 

Apple Inc was also in focus after the company opened its first retail store in India and extended its retail network in one of its fastest growing markets for its products. 

Apple is in the middle of diversifying away from its manufacturing base from China to India and the maker of popular computing devices is also looking to ramp up its sales. 

In the latest financial year, Apple sales in India jumped to $6 billion and analysts are estimating that the company can sustain a growth rate upwards of 30% for several years. 

In the U.S., Apple launched its Apple Card savings account with no minimum deposit or balance and offered 4.15% annual percentage yield.  

 

Indexes & Yields 

The S&P 500 index increased 2.67 points to 4,153.80 and the Nasdaq Composite index fell 10.95 points to 12,144.45. 

The yield on 2-year Treasury notes increased 2 basis points to 4.21%, 10-year Treasury notes fell 1 basis point to 3.57% and 30-year Treasury bonds jumped 2 basis points to 3.82%. 

Crude oil declined 19 cents to $80.63 a barrel and natural gas futures rose 9 cents to $2.36 a thermal unit.

 

U.S. Stock Movers 

Bank of America increased 0.7% to $30.55 after the bank reported better-than-expected revenue and earnings in the first quarter, reflecting a jump in net interest rate margin. 

Goldman Sachs Group Inc decreased 2.3% to $331.89 after the investment bank reported lower-than-expected revenue and took a charge of $470 million related to the sale of its consumer loans business Marcus. 

Lockheed Martin Corp rose 2.9% to $504.16 after the aerospace company and defense contractor reaffirmed its full-year outlook and posted better-than-expected quarterly results. 

Net sales in the first quarter increased to $15.1 billion from $15.0 billion and net income was flat at $1.7 billion and diluted earnings per share rose to $6.61 from $6.44 a year ago. 

The company paid $784 million in dividends and $500 million of its own shares in the first quarter. 

Johnson & Johnson decreased 2.4% to $161.72 after the pharmaceuticals and consumer products maker said first quarter revenue increased 5.6% to $24.75 billion. 

The company swung to a net loss of $68 million from a profit of $5.2 billion and diluted earnings per share of ($0.03) from $1.93 a year ago. 

Adjusted earnings, which excludes special items and amortization expenses,  fell 0.9% to $7.06 billion from $7.2 billion and adjusted diluted earnings per share of $2.68 from $2.67 a year ago. 

 

European Markets Approached Record Territory

The European markets advanced in cautious trading as investors remained focused on corporate earnings.  

Benchmark indexes opened slightly higher but extended gains and the French index traded at a new record high after China's economy expanded at a faster pace in the first quarter. 

China's GDP rose at an annual pace of 4.5% in the first quarter, a rebound from 2.9% in the fourth quarter, the National Bureau of Statistics said Tuesday. 

The stronger-than-expected rebound was in part driven by additional stimulus provided by the Chinese government for infrastructure projects. 

Economists in China were anticipating the GDP to expand at 4.0% and the faster rebound raised hopes that the world's second largest economy may exceed the 5.0% growth target set by the government in 2023. 

Meanwhile, investors overlooked the weakening of the German investor morale in April and the UK's annual wage growth was significantly ahead of market expectations.

 

UK Wage Growth Ahead of Expectations

Average weekly earnings from a year ago in three months to February rose 5.9% to £638.0, the Office for National Statistics said Tuesday. 

Regular pay, which excludes bonus, increased 6.6% to £596.0, ahead of expectations of 6.2% set by some economists. 

Regular wages adjusted for inflation fell 3% and excluding bonus declined 2.3%, the largest decline since 2009.  

 

Italy's Foreign Trade Swung to Surplus

Italy's foreign trade swung to surplus after exports rose faster than imports, the statistical agency Istat reported Tuesday.

Total exports not adjusted for seasonal factors increased to Є52.44 billion and imports rose to Є50.34 billion, resulting in trade surplus of Є2.2018 billion. 

Italy's non-seasonally adjusted merchandise trade swung to a surplus of Є2.108 billion from a deficit of Є1.475 billion. Excluding energy, trade surplus rose to Є7.9 billion. 

On a seasonally adjusted basis, trade surplus increased to Є2.9 billion from Є1.99 billion in January after imports declined for the sixth month in a row. 

Non-seasonally adjusted exports increased 10.8% from a year ago in February following 15.5% in the previous month and imports rose at a slower pace of 3.6% from 8.6% in January. 

Import prices in February fell 1.7% from the previous month but rose 1.3% from a year ago. 

For the first quarter ending in March, non-seasonally adjusted trade deficit was Є2.128 billion. 

 

Indexes & Yields 

The DAX index increased 0.6% to 15,882.67, the CAC-40 index added 0.5% to 7,533.63 and the FTSE 100 index advanced 0.4% to 7,909.44. 

The yield on 10-year German Bunds inched higher to 2.46%. French bonds hovered near 2.95%, the UK gilts to 3.71% and Italian bonds to 4.28%.  

The euro edged lower to $1.097, the British pound traded down to $1.241 and the Swiss franc trended lower to 89.66 cents. 

Brent crude was nearly unchanged at $84.79 a barrel and the Dutch TTF natural gas edged up 26 cents to Є42.72 per MWh. 

 

Europe Stock Movers 

easyJet plc increased 0.9% to 515.68 pence after the deep discount airline forecasted full-year profit is likely to exceed market expectations. 

UBS Group AG increased 1.2% to Sfr 18.95 after the Swiss bank said it may use some of the shares held in treasury instead of canceling them for the purchase of Credit Suisse. 

MTU Aero Engines AG increased 1.3% to €240.30 after the maker of military engines reported better-than-expected revenue. 

MTU Aero said first quarter revenue increased to €1.54 billion and adjusted earnings of €212 million. 

The preliminary first quarter results are ahead of the market expectations of 1.4 billion in revenue and 172 million in adjusted earnings. 

Free cash in the quarter was €93 million, lower than market estimate of €97 million.   

The company said it will release the first quarter financial results on April 26. 

LM Ericsson dropped 6.6% to SEK 58.32 despite the Swedish telecom equipment maker reporting better-than-expected core earnings in the first quarter. 

Net sales in the first quarter increased 14% to SEK62.6 billion but net income plunged 46% to SEK 1.6 billion from SEK 2.9 billion and diluted earnings per share declined to SEK0.45 from SEK0.88 a year ago.