The US rating, which had opened this Friday sharply lower with Tesla and the banks, is now rising towards balance or nearly so. The S&P 500 lost just 0.15% to 3,977 points, the Nasdaq gained 0.01% to 11,002 points and the Dow Jones advanced 0.11% to 34,227 points. On the Nymex, a barrel of WTI crude oil rose 1.5% to $79.50. An ounce of gold rose 1% to $1,917. The dollar index is stabilizing against a basket of benchmark currencies.
Caution prevails, a day after a bullish session, following figures “in line” with US inflation expectations for December. Operators, comforted by the idea of a gradual decline in inflation and therefore less vigorous monetary tightening by the Fed, are now awaiting quarterly releases from major companies.
Fourth quarter earnings season really begins in earnest this Friday on Wall Street, with the release of accounts for many major banks as well as other firms. UnitedHealth, JP Morgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup, Bank of New York Mellon, Delta Air Lines or Wipro, published specifically before the market.
In economic news on Wall Street today, import prices rose 0.4% in December (FactSet consensus -0.8% from last month). On the other hand, export prices fell by 2.6% compared to November, against the consensus of -0.7%.
The preliminary US consumer sentiment index measured by the University of Michigan for January 2023 was 64.6, well above the consensus of economists of 60.4 (FactSet measure). This indicator of US consumer sentiment stood at 59.7 in December.
Finally, the Fed’s Patrick Harker will speak during the day, but according to his prepared remarks, he will not comment on the monetary outlook.
Major investment banks remain divided on the strategy they should adopt in today’s markets. According to Bank of America strategists, US stocks are poised for another decline before finally recovering in the second half when economic conditions stabilize.
Earnings revisions for the S&P 500 point to a tough downside, even as the market expects a soft downside, Goldman Sachs strategists led by David Kostin said in a note issued last night.
Finally, Barclays believes markets may have good reason to see the glass half full on inflation and reject the central bank’s dovish rhetoric.
Tesla (-2%) lowers Model 3 and Model Y prices for the US market. According to a Reuters calculation based on prices from Tesla’s website, the declines range from 6% to 20% from past prices. These new prices do not even take into account the federal credit of 7,500 dollars given since the beginning of the month for the purchase of a certain number of electric vehicles in the United States of America. Elon Musk’s group had already given discounts in China, South Korea, Japan, Singapore and Australia in recent days, while it is clearly gearing its strategy towards market share gains rather than margins.
In China, a crucial market, the Texas-based electric car giant, which lost two-thirds of its Wall Street value last year, is also cutting the prices of the Model 3 and Model Y. The latest cut, as well as cuts to October and that various incentives of up to 10,000 yuan have been given to Chinese buyers over the past three months represent a 13% to 24% reduction in Tesla prices since September, according to Reuters calculations.
Price cuts are finally confirmed in Europe. In Germany, for example, Reuters reports that Tesla has cut the prices of the Model 3 and Model Y — its best-sellers worldwide — by 1% to nearly 17% depending on configuration. The group also cut prices in Austria, Switzerland and France.
JP Morgan Chase (+1%) has just released its latest quarterly accounts. The largest US bank by assets has announced an increase in its quarterly earnings, but now expects a mild recession. Jamie Dimon’s bank has also secured $1.4 billion in the case. In the quarter ended December, earnings came to $11 billion or $3.57 per share, compared with $10.4 billion or $3.33 per share a year earlier. Adjusted earnings per share were $3.56, well above market expectations.
Bank of America (-1%) published results above expectations for the last quarter, which does not prevent the consolidation of the title 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 rose 11% to $24.5 billion. The consensus was for 77 cents in adjusted earnings per share on $24.3 billion in revenue. Net interest income increased by 29% in the fourth quarter to ALL 14.7 billion.
Wells Fargo (-1%) stagnated on Wall Street, as the US bank reported halved profits and revenue below market expectations. Wells has racked up more than $3 billion in costs from a fake account scandal and has increased loan loss reserves in the event of an economic downturn. The provision for loan losses was $957 million, compared to a change of $452 million a year ago. The fourth-largest US lender reported earnings of 67 cents per share for the quarter to the end of December, compared with $1.38 per share a year earlier. Group CEO Charlie Scharf is working to fix the bank’s problems after it spent billions on lawsuits and regulatory fines.
BlackRock (stable), the US asset management giant, reported a 23% lower profit for its fourth quarter. Adjusted quarterly earnings were $1.36 billion, or $8.93 per share, compared with $1.65 billion for the comparable period last year. The consensus was around $8.1 adjusted EPS. Total assets under management at the end of the period reached about 8.590 billion dollars, against 7.960 billion at the end of the third quarter. Annual revenue fell 8% year-over-year, with declining and rising greenback markets as well as lower performance fees.
UnitedHealth (+2%), the US insurance and healthcare group, posted fiscal fourth-quarter revenue of $82.8 billion, up from $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 stood at 5.8% versus 5.5% a year ago. Adjusted earnings per share were $5.34. The consensus was $5.17 adjusted EPS on $82.6 billion in revenue.
Goldman Sachs (stable) revised the pre-tax loss related to its newly created financial solutions subsidiary to $1.2 billion for the first nine months of 2022.
Citigroup (stable) posted a decline in banking revenues and net profits during the quarter, as the bank increased its provisions to better cope with a possible deterioration in the economic environment. Net income came in at $2.5 billion and $1.16 per share, compared to $3.2 billion for the corresponding period last year.
Delta Air Lines (-4%) fell, operators sanction somewhat short forecasts for the first quarter of 2023. The Atlanta-based carrier expects adjusted EPS of 15 to 40 cents during the period, versus a consensus of 54 cents. Unit costs, excluding fuel, will rise up to 4% from a year ago, a forecast Delta says includes “expected increases in labor costs” and the impacts of network reconstruction. Although Delta warns of cost pressures, Chief Executive Ed Bastian said “the environment for air travel remains favorable” in 2023.
Wendy’s (+5%). Nelson Peltz’s activist Trian Fund Management said it would not make an offer to buy the fast-food chain.