Wall Street is rising, along with Tesla and the banks
America’s rating is now falling quite heavily ahead of Friday’s trade with Tesla and financial stocks. S&P 500 fell by 1%, Nasdaq by 1.1%, Dow Jones by 0.8%. One barrel of WTI brand oil increased by 0.2% to 78.5 dollars on the Nymex exchange. An ounce of gold rose 0.2% to $1,902. The dollar index rose 0.2% against a basket of benchmark currencies.
Attention dominates the next day of the growth session after figures below “in line” with US inflation expectations for December. Comforted by the gradual decline in inflation and therefore the idea of less strong monetary tightening by the Fed, operators are now waiting for the quarterly releases of major companies.
Fourth quarter results season really kicks off in earnest this Friday with the release of accounts from many of the big banks as well as other firms on Wall Street. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup, Bank of New York Mellon, Delta Air Lines, or Wipro typically publish before the market. Forecasts are shy.
S&P 500 companies could see their first decline in earnings since the third quarter of 2020, with the fourth quarter estimated to be down more than 4%. Analysts have significantly reduced their forecasts in recent months, but some strategists still believe the figures are not revised far enough.
In economic news on Wall Street today, import prices rose 0.4% in December (-0.8% month-on-month in the FactSet consensus). Export prices decreased by 2.6% against the consensus of -0.7% compared to November.
The preliminary index of US consumer sentiment for January 2023 measured by the University of Michigan will be released at 4:00 PM (FactSet consensus 60.3). Finally, the Fed’s Patrick Harker will speak during the day.
Major investment banks are divided on the strategy to adopt in today’s markets. According to Bank of America strategists, US stocks are poised for another drop before eventually rebounding in the second half as economic conditions stabilize.
Goldman Sachs strategists led by David Costin said in a note released last night that S&P 500 earnings revisions point to a sharp decline, even as the market expects a soft decline.
Ultimately, Barclays believes markets may have good reason to see inflation as half-full and reject the central bank’s hawkish rhetoric.
Tesla is lowering the prices of the Model 3 and Model Y for the US market. According to Reuters estimates based on prices on Tesla’s website, the declines range from 6% to 20% compared to past prices. These new prices also do not take into account a $7,500 federal credit that was offered earlier this month for the purchase of a certain number of electric vehicles in the United States.
Elon Musk’s group has made cuts in recent days in China, South Korea, Japan, Singapore and Australia, while it is focusing its strategy on market share growth rather than margins.
The Texas electric car giant, which has lost two-thirds of its value on Wall Street in the past year in China, an important market, is also cutting prices for the Model 3 and Model Y. Various incentives of up to 10,000 yuan were given to Chinese buyers in October and the past three months, according to Reuters estimates, representing a 13% to 24% drop in Tesla prices since September.
Price cuts are finally confirmed in Europe. In Germany, for example, Reuters reported that Tesla cut the prices of its best-selling Model 3 and Model Y models worldwide by between 1% and 17%, depending on the configuration. The group also cut prices in Austria, Switzerland and France.
JP Morgan Chase fell 2% in pre-market trading on Wall Street as the American banking giant released its latest quarterly results. The largest US bank by assets reported a rise in quarterly profit, but now expects a slight decline. Jamie Dimon’s bank also provided $1.4 billion in this case. In the quarter to the end of December, profit came to $11 billion and $3.57 a share, compared with $10.4 billion, or $3.33 a share, a year earlier. Adjusted earnings per share were $3.56, well above market expectations.
Bank of America posted better-than-expected results for the quarter just ended, which doesn’t stop the headline from strengthening on Wall Street. Profit attributable to common shareholders rose 2% to $6.9 billion in the fourth quarter. Earnings per share were $0.85. Net banking income increased by 11% to $24.5 billion. The consensus was for adjusted earnings per share of 77 cents on revenue of $24.3 billion. In the fourth quarter, net interest income increased by 29% to 14.7 billion.
Wells Fargo stumbled on Wall Street as the US bank reported a halving of profit and revenue that fell short of market expectations. Wells took more than $3 billion in costs from the fake account scandal and increased loan loss reserves during the economic downturn. The allowance for loan losses was $957 million, compared to a $452 million decrease a year ago. The fourth-largest U.S. lender reported earnings of 67 cents a share for the quarter to the end of December, compared with $1.38 a share a year earlier. The group’s chief executive, Charlie Scharf, has been working to fix the bank’s problems after spending billions in litigation and regulatory fines.
American asset management giant BlackRock announced a 23% drop in fourth-quarter profit. Adjusted earnings for the quarter were $1.36 billion, or $8.93 per share, compared with $1.65 billion in the year-ago period. The consensus was for adjusted EPS of about $8.1. Total assets under management at the end of the period were approximately $8.590 billion, compared to $7.960 billion at the end of the third quarter. Annual revenue was down 8% year-on-year, driven by falling markets and a stronger dollar, as well as lower performance fees.
UnitedHealth, an American insurance and healthcare group, reported revenue of $82.8 billion in the fourth fiscal quarter, compared with $73.7 billion a year earlier. Profit from operations was $6.9 billion, up from $5.5 billion in the comparable period a year ago. Net margin was 5.8% against 5.5% a year ago. Adjusted earnings per share were $5.34. The consensus was for adjusted EPS of $5.17 on revenue of $82.6 billion.
Goldman Sachs revised up a pre-tax loss related to its newly formed financial solutions subsidiary to $1.2 billion for the first nine months of 2022.
Citigroup reported a decline in net banking income and profit during the quarter, as the bank boosted reserves to better deal with a likely deterioration in the economic environment. Net income was $2.5 billion and $1.16 per share, compared with $3.2 billion in the same period last year.
Delta Air Lines is pulling back, with operators allowing a slightly shorter forecast for the first quarter of 2023. The Atlanta-based carrier expects adjusted EPS of 15 to 40 cents during the period, versus the consensus of 54 cents. Unit costs excluding fuel will rise up to 4% from a year ago, Delta said, including “expected increases in labor costs” and the impact of network restructuring. Although Delta warned of cost pressures, Chief Executive Ed Bastian said 2023 “will remain a favorable environment for air travel.”
Wendy’s is suffering on Wall Street as Nelson Peltz’s activist fund Trian Fund Management said it would not make a takeover bid for the fast food chain.