Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Markets Edge Lower As Retails Sales Slump 1.9%, Banks Report Solid Quarter

By TD Ameritrade (JJ Kinahan)Stock MarketsJan 14, 2022 11:21AM ET
www.investing.com/analysis/markets-edge-lower-as-retails-sales-slump-19-banks-report-solid-quarter-200614797
Markets Edge Lower As Retails Sales Slump 1.9%, Banks Report Solid Quarter
By TD Ameritrade (JJ Kinahan)   |  Jan 14, 2022 11:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

JPMorgan (NYSE:JPM) reported a 14% drop in fourth-quarter earnings but beat analysts’ estimates. They posted a profit of $10.4 billion, or $3.33 per share, compared with $12.1 billion, or $3.79 per share, in the fourth quarter of last year. Analysts’ consensus had expected earnings of $3.01 per share. Revenue missed expectations with trading revenue down 7% and fixed income down as well.

Wells Fargo (NYSE:WFC) revenue came in at $20.86 billion vs. consensus of $18.79 billion. Last year was $18.49 billion. Wells Fargo beat estimated earnings by 23.21% reporting an EPS of $1.38 versus an estimate of $1.12 surprising analysts.

Citigroup (NYSE:C) fourth quarter adjusted EPS came in a $1.46 versus a consensus estimate of 1.37. This came in lower than last years’ same quarter at $1.92. Revenue came in at $17.02 billion compared to estimates of $16.85 billion. The same period last year was $16.83 billion. Sales were reported at $17.00 billion, which beat estimates of $16.77 billion. Same period last year was $16.50 billion.

BlackRock (NYSE:BLK) beat estimated earnings by 2.66%, reporting an EPS of $10.42 versus an estimate of $10.15 and $10.02 in the year ago period. Assets under management rose 15% to $10.1 trillion.

First Republic Bank (NYSE:FRC) beat estimated earnings by 4.66% reporting an EPS of $2.02 versus an estimate of $1.92 a share. Last year EPS was $1.60. Revenue was up $287 million from the same period last year. First Republic saw growth in loans, deposits, and wealth-management assets.

Retail Sales slumped 1.9% overall in December. Sales excluding autos and gas fall 2.5%. This is the largest decrease since February 2021.

Yields are slightly higher at .64% with the VIX up 5.5%. S&P down .6%. Yet to be seen is how traders react. Will they be too nervous to hold over the weekend?

The battle of the Nasdaq Composite heated up on Thursday when the bears struck back against the bulls, resulting in a 2.51% sell-off. On Monday, the bears pushed the Nasdaq well below its 14,900 level, but the bulls were able to battle back and help the index close positive for the day. Then the Nasdaq was able to put together a three-day and more than 2% rally. However, the bears have pushed the tech-heavy index back to support once again.

The Technology Select Sector Index fell 2.60% despite better-than-expected earnings from Taiwan Semiconductor (NYSE:TSM), which resulted in a 5.26% rally in the stock. But the one stock alone wasn’t enough as it was swimming upstream against an industry group that was falling. The PHLX Semiconductor Index fell 2.29% on the day. The software industry group was one of the worst performers in the tech sector with the S&P Software & Services Select Industry Index falling 3.16% on the day.

Weakness in the tech sector was also a drag the S&P 500, which closed 1.42% lower. The Dow Jones Industrial Average held up a little better but still fell 0.49%. Technology, consumer discretionary, and health care were the bottom sectors, while utilities, industrials, and consumer staples were the top and only sectors with positive returns on Thursday.

Vaccine makers traded lower after the Supreme Court blocked the Biden administration’s COVID-19 vaccine-or-testing rules for large private employers. While the government did have some latitude for health-care providers because they receive federal funds for Medicare and Medicaid programs, the private-employer requirements for businesses with 100 or more employees was said to exceed the authority that Congress had granted the Occupational Safety and Health Administration (OSHA). Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), BioNTech (NASDAQ:BNTX) and Johnson & Johnson (NYSE:JNJ) fell 1.96%, 5.71%, 8.10% and 0.61%, respectively.

Easy Come…

After skyrocketing more than 14% on Wednesday, natural gas futures gave most of their gains back on Thursday, falling more than 12%. Apparently, traders felt that the market got a little carried away and pushed prices lower. The supposed cold snap that drove natural gas higher may still be a threat because heating oil futures were able to eke a second consecutive higher 52-week close.

It would seem logical that changes in the weather that effect natural gas and heating oil prices would also affect electric and gas utility companies. However, utilities aren’t sensitive to these costs because they’re usually able to pass the changing costs on to consumers. Instead, utilities are more sensitive to changes in yields or interest rates.

Investors commonly hold utilities because of their low volatility and high dividend yields. Therefore, utilities tend to perform better when investors are nervous or bearish or when yields are falling. Higher yields on Treasuries make them a more enticing investment than utilities because they’re considered safer investments. But lower Treasury yields make the higher dividends of utilities more appealing.

With that said, Treasury yields and utilities have been a little out of sync during the pandemic. At times, they’ve moved in opposite directions, and at times, they’ve moved together. The issue has been investor nervousness about the economy as well as the prospect of the Fed raising rates.

Utilities And 10-Year Yield Combined Chart.
Utilities And 10-Year Yield Combined Chart.

CHART OF THE DAY: MARGINAL UTILITY. The Utilities Select Sector Index ($IXM—candlesticks) was mostly inverse to the 10-year Treasury yield (TNX—pink) before the COVID-19 pandemic hit in February 2020, but the relationship has been disjointed since. Data Sources: ICE, S&P Dow Jones Indices. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Brick House: Energy stocks tend to have a more direct relationship to inflation because of the central role petroleum products play in the transporting and creation of numerous products. This is why crude oil is by far the largest commodity traded in the world. Looking at the materials sector, we can try to identify other areas that could be inflation driven.

Construction materials have led the materials sector higher, likely because of the strength in the housing market. The COVID-19 pandemic was actually a boom for housing as low interest rates and lockdowns prompted many people to move out of crowded metropolises and to less populated areas.

Gold Digger: Another materials group that will likely benefit from inflation is metals and mining, particularly companies that have higher exposure to precious metals. In the past, gold and silver have been used as a hedge for inflation. When inflation rises, gold usually rises too.

However, in 2021, gold has yet to live up to its reputation as a hedge for inflation. This could be because the U.S. dollar has actually strengthened over the last year despite rising inflation. It could also be because investors are using cryptocurrencies as a hedge instead of gold. Finally, it could simply be that investors don’t think inflation is a long-term issue. While inflation may be lasting longer than the Fed and other central banks had hoped, many of the current issues could still be seen as pandemic-related demand and supply chain problems. If inflation does continue to persist, metals and mining could benefit.

Take The Box: The containers and packaging group tend to be correlated with retail stocks and materials stocks because of the demand to get products to market—meaning a need for cardboard boxes and shipping containers. Rising inflation may produce higher retail sales figures, but that doesn’t mean a higher number of items purchased. It could mean that the items were just more expensive. Fewer items at a higher price means fewer boxes and containers needed.

Higher inflation could also translate to fewer chemicals purchased as well. With many chemicals being petroleum based, higher oil prices could also mean greater difficulty getting crude oil through refineries like we discussed in yesterday’s Market Update.

Disclaimer: TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

Markets Edge Lower As Retails Sales Slump 1.9%, Banks Report Solid Quarter
 

Related Articles

Markets Edge Lower As Retails Sales Slump 1.9%, Banks Report Solid Quarter

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Nana Frederick
Nana Frederick Jan 15, 2022 6:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hello how are you I'm sell pure gold is if you want to buy some just chat me
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email