Stock market today: Stocks rise as big bank earnings roll in
07/12/2024 20:48
Investors are bracing for Wall Street banks to kick off earnings season as they debate how deep the Fed could cut rates.
US stocks ticked up Friday after a tech-driven sell-off, as investors assessed earnings reports from big Wall Street banks and waited for inflation data that could test buoyant rate-cut hopes.
The S&P 500 (^GSPC) gained 0.2%, just off the benchmark's recent record high. The Dow Jones Industrial Average (^DJI) the tech-heavy Nasdaq Composite (^IXIC) also added on 0.2%.
Stocks were stabilizing after the S&P 500 and the Nasdaq both snapped a seven-day win streak on Thursday, as optimism over lower interest rates drove an exodus from Big Tech stocks.
A clutch of quarterly results from Wall Street banks got earnings season going in earnest before the bell, set to test the sector rally that has outstripped the S&P 500 this year.
JPMorgan Chase's (JPM) profit surged 25% in the second quarter, buoyed by rising investment banking fees and an $8 billion one-time gain linked to Visa, but shares slipped. Wells Fargo (WFC) stock sank 6% after it posted a drop in profit as it missed estimates for interest income. And Citi (C) lost 2% after reporting a 10% rise in profit but maintained a 2024 outlook with modestly lower net interest income.
At the same time, the market is weighing the shift from this year's winners Nvidia (NVDA) and the "Magnificent 7" techs — which just booked their worst day in almost a year — to the likes of utilities and real estate stocks.
Thursday's rotation out of techs came as investors took June's surprisingly mild consumer inflation print as reason for the Federal Reserve to cut rates. The market is almost fully pricing in a reduction in September, and bets are growing on a second cut in December, according to the CME FedWatch tool.
Now the debate has shifted from whether the Fed will act to how often and how deep, with some on Wall Street calling for rates to drop by as much as 0.75% by the end of the year.
Investors looking for easing price pressure on Friday confronted fresh data that complicated the narrative. The Labor Department said its producer price index rose 0.2% from May to June, and registered a year-over-year increase of 2.6%, a larger than expected rise. Less encouraging wholesale inflation data clashes with a string of readings that suggested cooling price pressures.
Live2 updates
Off the Phone With: JP Morgan CFO Jeremy Barnum
Just hopped off the earnings media call with JP Morgan (JPM) CFO Jeremy Barnum (hat tip to Yahoo Finance banking reporter David Hollerith for getting his question taken before mine).
Here was our exchange:
Me: We got some cautious results from various consumer companies this week such as PepsiCo (PEP) with them calling out some consumer caution. Anything you're seeing in your debit or credit data that would suggest consumers are are pulling back whether because of inflation or election concern"
Barnum: Short answer is no. So we've made a couple of these points over time, but I'll just reiterate them here. So our broad take is that the consumer spending in real terms is sort of flattish. So I'm seeing booming spending growth, but we're also not seeing, you know, any meaningful weakness there. Like with this data you can always take a magnifying glass to it and try to go deep and one of the things that we've seen a little bit in the spending patterns in the lower income segments, you are starting to see a little bit of evidence, some rotation of spending out of discretionary and non discretionary, which is traditionally for obvious reasons and understood to be a little bit of a sign of weakness. But in a world where the unemployment rate is 4.1% and GDP growth is slowing a little bit, the data that we're seeing on the consumer side is entirely consistent with that economic environment. And the big picture backdrop, whether it's spending or charge-offs or delinquency rates, cash buffers, etc, is still consistent with quite a healthy consumer. You know, it's not a concern at this point.
Note: JP Morgan CEO Jamie Dimon was interestingly not on the call per the usual. We were told it was due to a travel conflict as he was flying back from an event in Germany. There is nothing more to read into it, Barnum said in response to a reporter question on Dimon's absence.
Off the Phone With: BNY's CEO Robin Vince
TGIF!
I just caught up with BNY Mellon's (BK) CEO Robin Vince by phone following the company's earnings release (decent quarter). I thought my exchange with him below would be of interest. Note Vince was the former chief risk officer at Goldman Sachs (GS).
Me: How are you thinking about risk in the equity trading part of your business ahead of the election?
Vince: I think what we've seen over the history of time is that actually the equity market is somewhat indifferent to which party ends up controlling the White House. What it cares a little bit more about is what the mix is of control of the two houses of Congress and the White House. And so if you s look on the basis of what's going on in control of the White House, the equity market history would tell us that the equity market doesn't necessarily care that much.
