JPMorgan (JPM) reported fourth-quarter earnings down 14% but beat analysts’ estimates. They posted a profit of $10.4 billion, or $3.33 per share, compared to $12.1 billion, or $3.79 per share, in last year’s fourth quarter. Analysts’ consensus expected earnings per share was $3.01. Revenue missed expectations, with business revenue down 7% and fixed income also declining. Investment banking Pre-market shares are down 3.8% despite global merger and acquisition activity breaking all-time records in 2021 and a record profitable quarter.
First Republic Bank (FRC) beat projected earnings by 4.66%, reporting EPS of $2.02, compared to estimates of $1.92 per share. Last year’s EPS was $1.60. Revenue was up $287 million from the same period last year. The First Republic saw an increase in loans, deposits and money-management assets. The stock is trading with a fall of 1% in the market.
Yield is slightly higher at .64% with VIX up 5.5%. S&P down .6%. It remains to be seen how the traders react. Will they be too nervous to stay over the weekend?
(Markets open Friday) JP Morgan (JPM), Wells Fargo (WFC), Citigroup (C), BlackRock (BLK), and First Republic (FRC)
Battle of Nasdaq
Technology Select Sector Index fell 2.60% despite better-than-expected earnings from Taiwan Semiconductor
Weakness in technical areas was also dragging the S&P 500 (SPX), which closed 1.42% lower. The Dow Jones Industrial Average ($DJI) was slightly better but still down 0.49%. Technology, consumer discretionary and health care were the bottom sectors, while utilities, industry and consumer staples were the top and only sectors with positive returns on Thursday.
Vaccine makers traded low after the Supreme Court blocked the Biden administration’s COVID-19 vaccine-or-test rules for large private employers. While the government had some latitude for health care providers as they received federal funding for the Medicare and Medicaid programs, the private-employer requirements for businesses with 100 or more employees were said to exceed the right that Congress granted to commercial businesses. Safety and Health Administration. (OSHA). pfizer
After skyrocketing more than 14% on Wednesday, natural gas futures returned most of their gains on Thursday, falling more than 12%. Obviously, traders felt that the market had retreated a bit and pushed the prices lower. The cold snap that pushed natural gas higher is believed to still be a threat as heating oil futures were able to hit a 52-week high for the second time in a row.
It seems logical that changes in the weather affecting natural gas and heating oil prices would affect electricity and gas utility companies as well. However, utilities are not sensitive to these costs because they are usually able to pass on changing costs to consumers. Instead, utilities are more sensitive to changes in returns or interest rates.
Investors typically hold utilities because of their low volatility and high dividend yield. Therefore, utilities tend to outperform when investors are nervous or bearish or when yields are falling. Higher yields on Treasuries make them a more attractive investment than utilities because they are considered safer investments. But lower Treasury yields make utilities’ higher dividends more attractive.
Simultaneously, the synergy of Treasury yields and utilities has shrunk slightly during the pandemic. At times, they have moved in opposite directions, and sometimes, they have moved together. The issue has been investors’ panic about the economy as well as the possibility of the Fed raising rates.
Bringing heat: With the weather getting colder and housing getting warmer, HVAC (heating, ventilation and air conditioning) may be on the mind of some investors. HVAC companies such as Ingersoll-Rand
Software too soft: The S&P Software and Services Industry Index is down more than 18% from its November 2021 high. The industry group is heading into bear territory (down 20%) and is gaining support from its spring 2021 lows. The group has been hit hard as investors have shifted their focus from growth to value. Many of these companies have high price-to-earnings ratios, if their earnings at all.
While tech support levels could halt a decline, the software group could continue to struggle if the Fed is to raise rates faster and higher than it has anticipated. Goldman Sachs analyst
TD Ameritrade® Commentary for educational purposes only. Member SIPC.