U.S. Market Averages Power Ahead After Weaker Wholesale Inflation and Bank Earnings

Barry Adams
12 Jan, 2024
New York City

Major averages on Wall Street advanced in early trading on the final trading day of this week, and investors digested the latest earnings results from banks and airlines.

JPMorgan Chase, Citigroup, and Bank of America reported sharply lower earnings from a year ago after banks took hefty charges linked to the regional bank crisis in 2023.

Wells Fargo reported higher earnings, helped by cost-cutting initiatives and higher interest rates compared to the previous year.

Delta Air Lines reported sharply higher earnings on strong travel demand and a record number of passengers paying higher ticket prices for premium services.

The S&P 500 index and the Nasdaq Composite advanced more than 0.4% after lower-than-expected wholesale inflation data.

Producer price index decreased 0.1% from the previous month in December, matching the rate in the previous month, the U.S. Bureau of Labor Statistics reported Friday.

The measure of wholesale inflation rose 1% from a year ago after rising at a 0.8% rate in the previous month.

Core inflation decelerated to 1.8% from 2.0% on an annual basis.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.4% to 4,798.95, and the Nasdaq Composite rose 0.5% to 15,044.61.

The yield on 2-year Treasury notes decreased to 4.27%. 10-year Treasury notes edged down to 3.99%, and 30-year Treasury bonds eased to 4.21%.

WTI crude oil increased $2.52 to $74.44 a barrel, and natural gas prices increased 8 cents to $3.17 a thermal unit.

Gold increased by $21.79 to $2,048.90 an ounce, and investors debated the future interest rate path.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.52.

 

U.S. Stock Movers

JP Morgan Chase rose 2.1% to $173.75 after the bank reported quarterly results and a rise in adjusted earnings, excluding fees paid to the government tied to the seizures of regional banks.

Revenue in the fourth quarter increased 12% to $39.94 billion, and net income declined 15% to $9.31 billion, or $3.04 per share.

Wells Fargo declined 1.1% to $48.46 despite the bank reporting higher earnings in the fourth quarter, but the bank warned that net interest income in 2024 is likely to be lower than the previous year.

Revenue in the fourth quarter increased 2% to $20.48 billion, and net income rose to $3.45 billion, or 86 cents, from $3.16 billion, or 75 cents, a year ago.

Net interest income in the quarter declined 5% from a year ago to $12.78 billion, and the bank warned that level could decline between 7% and 9% on an annual basis from $52.4 billion in 2023.

Citigroup rose 2.2% to $53.21 after the bank reported a quarterly loss as the company booked charges linked to restructuring, overseas risks, and last year's regional banking crisis.

Revenue in the fourth quarter decreased 3% to $17.4 billion, net income swung to a loss of $1.8 billion from a profit of $3.5 billion, and diluted earnings per share declined to ($1.16) from $1.16 a year ago.

Bank of America decreased 2.7% to $32.25 after the bank reported lower quarterly earnings because of one-time charges assessed by the FDIC and transitioning away from the London Interbank Offered Rate.

Revenue in the quarter increased to $22 billion, net income declined 50% to $3.1 billion from $7.1 billion, and diluted earnings per share dropped to 35 cents from 85 cents a year ago.

The charges in the quarter include a $1.6 billion pre-tax charge to transition away from LIBOR and a special fee of $2.1 billion charged by the Federal Deposit Insurance Corp. to rescue Silicon Valley Bank and Signature Bank.

Delta Air Lines declined 5.5% to $39.92 after the international carrier reported a sharply higher profit but lowered its 2024 outlook.

Operating income in the fourth quarter increased by 6% to $14.2 billion from $13.4 billion, net income soared to $2.03 billion from $828 million, and diluted earnings per share rose to $3.16 from $1.29.

The company guided full-year 2024 earnings to range between $6.0 and $7.0 per share, lower than the previous estimate of at least $7 per share released last year.

Revenue in the first quarter of 2024 is expected to increase between 3% and 6%, and earnings per share between 25 cents and 50 cents.