(Friday Market Open) Big banks take the spotlight today, as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) all surpassed earnings expectations. Stock futures pointed to a higher open based on the news.
And if those key earnings weren’t enough to make for a busy day, how about retail sales, the Producer Price Index, and a speech by Fed Chair Janet Yellen? All occur Friday.
But first come the big banks, and most of the news looked positive, with JP Morgan earnings easily surpassing estimates and revenue rising 8% from a year ago in Q3. WFC and C also beat analysts’ consensus.
WFC, the focus of investigations over phony accounts that led to its CEO resigning earlier this week, reported earnings per share of $1.03 on revenue of $22.3 billion. Analysts polled by Reuters had pegged a per-share profit of $1.01 on revenues of $22.2 billion, about flat to the year-ago results as well as the Q2.
For JPM and C, quarterly results were less fraught with controversy. JPM earnings per share blew past estimates at $1.58 on revenue of $25.5 billion as lending and investment banking income both rose. That compares with analysts’ consensus for profit of $1.40 per share on top line sales of $23.9 billion. Shares climbed 2% in the futures market ahead of the open.
And C reported earnings per share of $1.24 on revenue of $17.8 billion, compared with analysts’ estimates for $1.16 a share profit on revenues of $17.3 billion, according to Reuters. Analysts were looking for continued improvement in trading revenue at JPM after a strong Q2, and for improved credit card business tied to C’s new partnership with Costco (COST).
The banking industry continues to wrestle with regulatory issues and shrinking profits amid this low-interest rate environment, and WFC has spent several weeks in the headlines due to the scam accounts scandal. That might make WFC’s call, which began at 8 a.m. ET today, a particularly big draw for investors. Questions that may get addressed during the call include how will WFC handle operations going forward? How much has this scandal cost the bank in fines, in any remaining obligations, in lost revenues and business, in lost market capitalization and reputation? And how will WFC regain trust with customers and rebuild business in the retail bank? Stay tuned.
Big bank earnings were just one of the early headlines, as September retail sales also hit the market today, coming in with a rise of 0.6%, right at estimates. That follows a 0.3% drop in August, which at the time came as something of a surprise to many investors.
And to top it off, Yellen will be speaking at 1:30 p.m. ET at the Federal Reserve Bank of Boston's 60th economic conference, which is titled "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics.” It seems unlikely that Yellen would say anything the market hasn’t already heard, but it’s important to keep an eye on the speech just in case.
The SPX fell below technical support at 2128 on Thursday but then came back to close just above that level. That was an impressive comeback. The same 2128 level remains support for now.
Crude oil climbed above $51 a barrel early Friday, also lending a helping hand to the stock futures market before the open.
Reading the Inflation Meter: The Producer Price Index (PPI) for September came out this morning, and was up 0.3%, with core PPI up 0.2%. Analysts polled before the report by Briefing.com had predicted core PPI, a closely watched measure that strips out volatile food and energy prices, to rise 0.1%, equal to the previous month’s 0.1% rise. The Fed is likely to keep a close eye on PPI as its December meeting approaches, and any sign of rising inflation numbers could reinforce fears some Fed members expressed in last month’s meeting minutes about the economy possibly overheating.
Hang On! More Economic Reports Due a Little Later: Lost, perhaps, amid bank earnings, retail sales, and PPI is the fact that we still have two more economic reports to digest later today. It doesn’t get much busier than this, does it? The two reports to come are Michigan Sentiment and August business inventories, both due at 10 a.m. ET. Business inventories didn’t even budge in July, but are expected to rise 0.1% in August, according to Briefing.com. The Michigan sentiment data, a closely watched tracker of consumer confidence, will be the first estimate for October, and Briefing.com forecasts a slight rise to 92.0 from last month’s 91.2.
Bank Earnings Not Over Yet: Though today brought investors earnings results from three of the biggest banks, the reporting season isn’t over yet for some other key names in the sector. Next week brings more. It starts Monday morning with Bank of America (BAC), with consensus earnings projections at 34 cents per share, according to Briefing.com, down from 37 cents per share a year ago. BAC isn’t the only bank with earnings next week. Several smaller regional banks report on Tuesday. Other banks due to report include Goldman Sachs (GS) onTuesday morning and Morgan Stanley (MS) on Wednesday.
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