Markets Today: Stocks Fall as Big Bank Earnings Disappoint

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.91% and March Nasdaq 100 E-Mini futures (NQH23) are down -1.07%. 

U.S. stock index futures this morning are under pressure on weakness in bank stocks after several earnings disappointments.  Also, Tesla tumbled in pre-market trading after announcing it was cutting car prices in the U.S. and Europe.

In addition, stocks fell after this morning’s U.S. economic news showed that Dec import prices ex-petroleum unexpectedly rose.  The increase in import prices pushed bond yields higher, with the 10-year T-note yield up +3.6 bp at 3.476%.

Negative corporate news this morning is weighing on stocks.  Tesla is down more than -5% in pre-market trading after cutting prices of its Model 3 sedan and Model Y SUV in the U.S. and several European markets.  Also, Delta Air Lines is down more than -2% in pre-market trading after forecasting Q1 adjusted EPS that was well below consensus.

U.S. bank stocks are sliding today on disappointing Q4 earnings results.  Wells Fargo is down more than -3% in pre-market trading after reporting weaker-than-expected Q4 revenue.  Also, JPMorgan Chase is down more than -2% after reporting weaker-than-expected Q4 FICC sales and trading revenue.  In addition, Bank of America is down more than -2% after reporting Q4 net interest income FTE below consensus.

The U.S. Dec import price index ex-petroleum unexpectedly rose +0.8% m/m, the most in 9 months and above expectations of a -0.3% m/m decline, which was an unfavorable inflation indicator.

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +0.16%.  The Shanghai Composite Stock index closed up by +1.01%, and Japan’s Nikkei Stock index closed down -1.25%.

The Euro Stoxx 50 today rallied to a 10-3/4 month high and is moderately higher.  Better-than-expected Eurozone economic news is lifting stocks today after Eurozone Nov industrial production rose more than expected and after German 2022 GDP rose +1.9%, above expectations of +1.8%.  Lower government bond yields are also supportive for stocks, with the 10-year German bund yield down -2.9 bp at 2.130%, just above Thursday’s 4-week low of 2.093%.  European stocks fell back from their best levels as bank stocks fell on negative carry-over from a slide in U.S. bank stocks after several reported weaker-than-expected Q4 earnings.

The Shanghai Composite Stock index today rallied to a 1-month high.  Strength in Asian technology stocks led the overall market higher after Taiwan Semiconductor Manufacturing Co reported stronger-than-expected quarterly earnings results. Foreign buying of Chinese stocks also lifted the overall market as foreign funds today bought 13.3 billion yuan ($1.98 billion) of shares via trading links with Hong Kong.  Foreign buyers have returned to China as it emerges from Covid restrictions and pivots to pro-growth policies.

Today’s Chinese trade news was weak but came in better than expected.  China Dec exports fell -9.9% y/y, the biggest decline in 2-3/4 years but slightly better than expectations of -10.0% y/y.  Also, Dec imports fell -7.5% y/y, a smaller decline than expectations of -10.0% y/y.

Japan’s Nikkei Stock Index closed moderately lower.  Weakness in exporters weighed on the overall market after the yen rallied to a 7-1/2 month high against the dollar.  The yen is soaring on speculation the BOJ as soon as next week will announce a change to its ultra-easy monetary policy.  Also, Japanese government bond yields climbed and undercut stocks after the 10-year JGB bond yield jumped to an 8-1/4 year high of 0.575%, well above the BOJ’s upper target limit of 0.50%. 

The BOJ boosted QE and announced unscheduled bond purchases for a second time on Friday after the first round of buying failed to lower the 10-year JGB bond yield.  As a result, the BOJ bought a record amount of bonds Friday, including 1.8 trillion yen ($14 billion) of one-to-25-year debt at market yields and 3.21 trillion yen of 10-year notes and futures-linked securities at a fixed yield of 0.5%.

The BOJ also said it would conduct additional outright purchases of Japanese government bonds on Monday, with the amounts to be determined by market conditions.  The BOJ has conducted a combination of additional unlimited and fixed-amount purchase operations every business day since Dec 28, except for Jan 5, 10, and 12. 

Pre-Market U.S. Stock Movers

Tesla (TSLA) tumbled more than -5% in pre-market trading after cutting prices of its Model 3 sedan and Model Y SUV in the U.S. and several European markets. Other electric vehicle makers also fell on the news, with Rivian Automotive (RIVN) and Lucid (LCID) down more than -2%.

Wells Fargo (WFC) dropped more than -3% in pre-market trading after reporting Q4 revenue of $19.66 billion, below the consensus of $19.95 billion 

JPMorgan Chase (JPM) fell more than -2% in pre-market trading after reporting Q4 FICC sales and trading revenue of $3.74 billion, weaker than the consensus of $3.91 billion.

Bank of America (BAC) dropped more than -2% in pre-market trading after reporting Q4 net interest income FTE of $14.80 billion, below the consensus of $14.95 billion, and Q4 net charge-offs of $689 million, above the consensus of $639.6 million. 

Lockheed Martin (LMT) fell more than -3% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral.

Delta Air Lines (DAL) fell more than -2% in pre-market trading after forecasting Q1 adjusted EPS of 15 cents-40 cents, well below the consensus of 54 cents.

Fortinet (FTNT) slid more than -3% in pre-market trading after BTIG LLC downgraded the stock to neutral from buy.

Hanesbrands (HBI) jumped more than +5% in pre-market trading after it said it would report Q4 net sales “slightly above the top end” of its guidance range. 

Carrier Global (CARR) rose more than +1% in pre-market trading after Mizuho Securities upgraded the stock to buy from neutral with a price target of $53.

Icon Plc (ICLR) gained nearly +1% in pre-market trading after Barclays upgraded the stock to overweight from equal weight.

Today’s U.S. Earnings Reports (1/13/2023)

Bank of America Corp (BAC), Bank of New York Mellon Corp/T (BK), BlackRock Inc (BLK), Citigroup Inc (C), Delta Air Lines Inc (DAL), First Republic Bank/CA (FRC), JPMorgan Chase & Co (JPM), UnitedHealth Group Inc (UNH), Wells Fargo & Co (WFC).

• Disney's Spike Attracts Covered Call and Short Put Option Income Players
• These 11 Stocks Are Still Showing High Implied Volatility
• Pre-Market Brief: Stocks Mostly Higher As Cooling Inflation Eases Rate Fears
• Stocks Higher as Bond Yields Tumble on Slowing U.S. Inflation