U.S. Major Indexes Decline On Inflation Worries, Big Banks Report Big Earnings

Barry Adams
12 Apr, 2024
New York City

Stock market indexes decreased, and investors reviewed the latest earnings from big banks like JPMorgan, Citigroup, and Wells Fargo. 

The S&P 500 index and the Nasdaq Composite inched lower in Friday's trading and diverged in weekly performance, indicating a bifurcated market. 

JPMorgan reported strong quarterly results, but the company cited higher inflation as weighing on the economy. 

The bank also held its annual net interest income estimate at $90 billion, suggesting no room for improvement compared to the previous year. 

Market sentiment remained cautious as investors debated future rate paths, resilient economic conditions, and moderating labor market conditions. 

Investors are also worried that the high valuation of tech companies could pose a challenge for market indexes to extend additional gains in 2024. 

The Nasdaq Composite is trading at about 28 times earnings multiples, and the S&P 500 index is approaching a multiple of 25, which is not cheap by historical measures. 

In 2024, the Nasdaq Composite is up 10.4% and the S&P 500 index is up 9.0%. 

 

U.S. Indexes and Yields

The S&P 500 index increased 0.5% to 5,184.08, and the Nasdaq Composite rose 0.8% to 16,292.93. 

The yield on 2-year Treasury notes edged lower to 4.89%, 10-year Treasury notes inched up to 4.50%, and 30-year Treasury bonds edged up to 4.61%.

Crude oil prices surged on speculation that Iran is preparing to carry out a direct attack on Israel in response to Israel's attack on Iran's embassy in Syria two weeks ago. 

WTI crude oil increased $2.02 to $86.99 a barrel, and natural gas prices decreased 5 cents to $1.75 a thermal unit.

Gold increased by $20.06 to $2,396.12 an ounce, and silver rose 80 cents to $29.29. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 106.01.

 

U.S. Stock Movers

JPMorgan Chase declined 4.9% to $185.90 after the bank reported strong results in the March quarter, but investors sold stock on the lack of improvement in its net interest income. 

JPMorgan reported net revenue in the first quarter increased 9% to $41.9 billion from $38.3 billion, net income rose 6% to $13.4 billion from $12.6 billion, and diluted earnings per share advanced 8% to $4.44 from $4.10 a year ago. 

The company provisioned $1.9 billion for credit losses, 17% smaller than a year ago, indicating an improving loan portfolio. 

Customers continue to shift deposits to higher-yielding assets, and bank deposits declined 7% in the quarter, excluding First Republic's acquisition. 

The company also paid $725 million in special assessment charges to the FDIC to cover costs linked to bank failures last year. 

Wells Fargo increased 0.1% to $56.78 after the bank reported better-than-expected earnings and revenue for the first quarter. 

Total revenue in the first quarter increased to $20.86 billion from $20.73 billion, net income fell to $4.6 billion from $4.99 billion, and diluted earnings per share declined to $1.20 from $1.23 a year ago. 

Net interest income decreased 8% from a year ago to $12.2 billion from $13.3 billion due to the impact of higher interest rates on funding costs, including the impact of customer migration to higher-yielding deposit products as well as lower loan balances, partially offset by higher yields on earning assets. 

Average loans in the quarter eased to $928 billion from $948 billion, and average deposits fell to $1.34 trillion from $1.36 trillion a year ago, respectively. 

Provision for credit losses fell 22% to $938 billion from $1.2 trillion a year ago. 

The company repurchased 112.5 million of its own shares for $6.1 billion in the quarter.