Wall Street nervous after disappointment in retail sales, much worse than expected, and struggling with falls in JP Morgan and Citigroup stocks, down after the publication of the quarterly reports.
The Dow Jones index dropped about 270 points (-0.74%), at about 35,844 points; the S&P 500 loses 0.26% to 4,647 points, while the Nasdaq marks a recovery of 0.15% to 14,832 points.
10-year Treasury rates rise to 1.742%, retracing the record from the pre-pandemic period tested days ago to more than 1.80%.
From the macro front, the blow came precisely from the data relating to retail sales in December, which fell by 1.9%, doing much worse than the unchanged trend expected by the analysts’ consensus, after the rise of 0 , 2% in November (figure revised downwards from + 0.3% initially disclosed). The decline was the strongest in the past 10 months.
Excluding auto sales, retail sales slipped by 2.3%, compared with the + 0.2% estimated by the consensus, and following the previous 0.1% growth (revised down from + 0.3% previous).
Excluding auto and gasoline sales, the figure reported a decline of 2.5%.
The reason is to be seen in the leap of new infections in the US and around the world due to the spread of Omicron, which has destroyed the propensity to spend among consumers.
Apart from the Covid-19 variant, the data remains worrying as it also highlighted the drop in online sales, equal to -8.7%.
Bad among JP Morgan stocks, slipped up to -6%: the banking giant led by Jamie Dimon announced that it has ended the fourth quarter of 2021 with earnings of $ 10.4 billion, or earnings per share of $ 3.33, better than the $ 3.01 per share expected by analyst consensus. Eps, however, fell from $ 3.79 per share in the same period last year, when profits stood at $ 12.14 billion.
Revenue was $ 30.35 billion, better than the consensus’s $ 29.9 billion, and up from $ 30.16 billion in the fourth quarter of 2020.
However, the market focused on the trading division’s revenue trend, which fell 11% to $ 5.3 billion.
To be precise, when breaking down the figure, the fixed income division’s revenue fell 16% to $ 3.3 billion, while the equity division’s revenue dropped 2% to $ 2 billion.
For his part, Jamie Dimon was once again optimistic:
“The economy continues to do well despite obstacles related to the Omicron variant, inflation and supply chain bottlenecks – commented the CEO of JP Morgan – Loans continue to pay in good condition, despite extremely net commissions. low, and we remain optimistic about economic growth, as corporate sentiment is positive, and consumers are benefiting from job and wage growth. “
Also bad after the quarterly report Citigroup, which announced that it has concluded the fourth quarter of 2021 with a net profit down 26% to $ 3.2 billion. Citigroup’s earnings per share fell from $ 1.92 in the fourth quarter of 2020 to $ 1.46, still doing better than the consensus expected $ 1.38 per share. Revenue stood at $ 17 billion, compared with analysts’ estimated $ 16.75 billion. Citigroup saw operating expenses jump 18% year-on-year to $ 13.5 billion.
Buy instead on the stock of the other American bank which released its balance sheet numbers today. This is Wells Fargo, which has announced that it has reported in the fourth quarter of 2021 earnings up to $ 5.75 billion, or $ 1.38 per share, compared to $ 3.09 billion, or 66 cents per share, for the same period. of last year.
The San Francisco-based banking giant beat analysts’ expectations, which had predicted an eps of $ 1.11. Revenue rose to $ 20.86 billion from $ 18.49 billion in the fourth quarter of 2020 and better than the consensus expected $ 18.79 billion.
“The changes we have made to the company and the prospects for continued solid economic growth make us positive about how we are positioned to enter 2022,” said CEO Charlie Scharf.
It should be noted that Wells Fargo’s prices have jumped by 16.7% since the beginning of 2022, in the wake of the expected US rate hike by the more hawkish Federal Reserve (Goldman Sachs expects at least four rate hikes this year) , with investors betting on improving the profitability of the bank and the banking sector in general. The S&P 500 lost 2.3% over the same time frame.
From the macro data, new indications on inflation have also arrived today, a great protagonist this week with the publication, in recent days, of the consumer price index and the producer price index.
Today was the turn of the import price index, which fell by 0.2%, compared to + 0.7% in November and compared to the + 0.2% expected by the consensus. On an annual basis, however, the trend was an increase of 10.4%, at the strongest pace since the rise of + 10.6% in 2007. Also excluding the fuel price component, the trend was a 0.5% increase. Again, on an annual basis, again excluding fuel prices, the trend was a jump in the import price index equal to + 6.4%, a record since 2002. On an annual basis, fuel prices have slipped in December of 6.5%, reporting the first decline since August 2021.
Finally, the data relating to industrial production in the United States was released, which fell by 0.1% in December, making it worse than the increase estimated by analysts, equal to + 0.3%.
The previous figure was revised upwards to + 0.7% from the + 0.6% initially announced. Manufacturing production fell by 0.3% in December, compared to the + 0.5% expected. Production capacity utilization was 76.5%, less than the expected 77%.
Yesterday Wall Street, and in particular the Nasdaq, came to terms with the publication of the producer price index.
The figure jumped 9.7% on an annual basis in December, slightly less than the jump of + 9.8% expected but accelerating compared to the previous + 9.6%.
The day before, the consumer price index had been released, which had flown by 7% in December, at the strongest pace since 1982.
The hope yesterday was that the fear linked to inflation and therefore to a more aggressive Fed on the rates front would take a back seat, giving way to the beginning of the US quarterly season.
That wasn’t the case, and the Nasdaq still paid off, with investors opting to continue the rotation from growth to value stocks. Now the index is up slightly, but the outlook for techs is far from rosy.
So Alicia Levine, head of the equity division at BNY Mellon Wealth Management, commented on the market trend at Cnbc:
“The impression is that pricing a more hawkish Fed will take a process, and not a week. Although a lot was priced last week, this will be a process and I believe there will be more volatility on stocks over the course of the first quarter. hi-tech and growth stocks, in general “.
For Levine, “the first quarter will be characterized by higher yields, rising rates, outperforming cyclical stocks, in a challenging environment for growth long-duration stocks.”