Big US banks weather industry turmoil to deliver strong results

Major US equity indices fell Friday as the release of surprisingly weak retail sales figures overshadowed strong earnings reports from JPMorgan Chase and Citigroup.  Despite Friday’s general market weakness, the S&P 500 Index touched a two-month high early in the session and posted its fourth weekly gain out of the past five.  Similarly, the Dow Jones Industrial Average was down for the day but up for the fourth straight week.  In Europe, markets rose on Friday, with the Euro Stoxx 50 Index up 0.6% to its highest level since December 2007, led by a 3% advance in banks. 

Summary as at 17.04.2023 

• Most Asian equities moved little on Monday tacking hawkish comments from Federal Reserve officials, while Chinese markets outperformed as the People’s Bank maintained medium-term lending rates ahead of a swathe of economic readings.  Shares in Australia also advanced, while South Korean and Hong Kong equities declined.  Meanwhile, Japanese shares fluctuated between gains and losses. 
• European and US shares are set for a positive start ahead of more Wall Street earnings.  
• Oil prices fell slightly this morning as hawkish comments from Federal Reserve officials on rising interest rates pushed up the dollar, with the focus now turning to a raft of Chinese economic readings this week for more cues on a recovery in demand. 

• Retail sales in the US sank 1% month-over-month in March, following a 0.2% fall in February, and way above consensus of a 0.4% drop in a sign that cost pressures and rising interest rates are weighing on consumers’ willingness to spend.  More than 2% declines were seen in sales at fuel stations, general merchandise stores, building materials and garden equipment, and electronics and appliances. 
• US Treasury Secretary Janet Yellen said banks are likely to become more cautious and may tighten lending further after recent bank failures, possibly negating the need for further Federal Reserve interest rate hikes. 
• JPMorgan Chase’s shares rallied more than 7% on Friday after the biggest US bank reported results that easily surpassed analysts’ expectations.  Profit increased 52% from a year earlier, and revenue increased 25%.  Revenue gains were driven by a 49% year-over-year rise in net interest income, reflecting the Fed’s nine rate hikes over the past 13 months. 
• Citigroup shares rose nearly 5% after reporting an EPS of $2.19 on Friday, topping analysts’ expectations by 51 cents, and an 11.5% rise in revenue to $21.4 billion.  Like other banks, Citigroup got a boost from rising net interest income.  Its revenue forecast for its 2023 fiscal year was also better than analysts expected. 
• Wells Fargo’s shares gave up some early gains on Friday despite reporting a 45% rise in net interest income, EPS of $1.23 (analysts were expecting $1.14), and revenue of $20.73 billion. 

•  UnitedHealth’s shares also fell Friday despite delivering expectations-beating results, due to concerns over how some 2024 policy changes may affect Medicare Advantage plan profits in the near term. 
• This week brings several more quarterly results that will be of keen interest to investors.  Companies expected to report include Bank of America, IBM, Lockheed Martin, Johnson & Johnson, United Airlines, Tesla, American Express, Union Pacific, Philip Morris, and Abbott Labs, among many others.  Elsewhere investors will be closely watching CPI figures of the UK and Canada.  Also, flash manufacturing and services PMIs are set to be released for the US, UK, and Euro areas.  Finally, China will publish GDP growth, retail sales, and industrial production figures.