|Dow||+59.66 to 18,036.70|
|S&P 500||+3.40 to 2,095.83|
|Nasdaq||-10.96 to 4,977.29|
|10-YR Yield||-.035 to 1.904%|
|Gold||-$7 to $1,192.30|
|Crude Oil||+$1.27 to $53.18|
Forget baseball. It’s earnings that are in full swing now!
Just in the past 24 hours, we learned …
JPMorgan Chase & Co. (JPM, Weiss Ratings: A) benefited from stronger capital markets, increased volatility and healthy asset management fees — helping the mega-bank top estimates. JPM earned $5.9 billion, or $1.45 per share in the first quarter, versus $5.3 billion, or $1.28 a share a year ago. If you strip out items, you get profit of $1.61 a share — better than the $1.41 estimate.
Digging a bit deeper, you see that fixed-income revenue climbed 4.5 percent while equities revenue jumped 22 percent. Asset management earnings climbed 11 percent, while commercial banking profit inched up 1 percent. JPM tested a 15-year-high on the news.
|JPMorgan Chase’s earnings beat Wall Street’s estimates.|
Wells Fargo & Co. (WFC, Weiss Ratings: A-) suffered from tight interest-rate spreads and higher expenses in the first quarter, but somewhat offset that with higher mortgage revenue. Profit dipped 1.5 percent to $5.8 billion, or $1.04 a share, from $5.9 billion, or $1.05 a share, in the year-earlier period.
That topped estimates of 98 cents a share. But net interest margin (NIM) slumped to 2.95 percent, the first time it fell below 3 percent since the 1990s. The figure represents the difference between the interest a bank pays out on its deposits, and what it earns from loans. The lower the number, the more the bank’s profit is getting squeezed. WFC shares slipped 0.7 percent on the day.
Johnson & Johnson (JNJ, Weiss Ratings: B+) managed to squeeze past analyst forecasts, but it was hampered by a strong U.S. dollar and weakness at its consumer products and medical devices divisions. Earnings of $1.56 a share excluding items beat forecasts by only 3 cents, while revenue dropped 4.1 percent to $17.4 billion.
Pharmaceutical revenue rose 3 percent thanks to the introduction of new drugs, but consumer products revenue sank 4.7 percent and medical device sales tanked 11.4 percent. JNJ shares finished the day roughly flat.
But perhaps the biggest disappointment of all came from railroad operator Norfolk Southern (NSC, Weiss Ratings: B+). The company pre-announced earnings per share of just $1, down 15 percent year-over-year and far below forecasts of $1.26. It also warned that revenue would fall 5 percent to a lower-than-expected $2.6 billion.
Lower oil prices hurt its crude shipping business. Plus, the gradual phasing out of coal in favor of natural gas as a power plant fuel caused coal shipping carloads to drop 10 percent. NSC shares dropped more than 4 percent to an 11-month low.
What’s the message from all of these reports, or the earlier ones we got from companies like Alcoa (AA, Weiss Ratings: B)?
Lower interest rates are still squeezing profits for financials, but some companies can stand out anyway. Health care remains a promising sector to invest in for stability and growth potential, despite hiccups like JNJ’s.
|“A potential topping out in the U.S. dollar might make companies like Alcoa a nice bargain play here.”|
The base metals business is a tough one, and so is the business of shipping bulk commodities. But if I’m right about the outlook for energy prices over the longer-term, companies like NSC might be able to recover from these shorter-term setbacks. Plus, strength in emerging markets investments and a potential topping out in the U.S. dollar might make companies like Alcoa a nice bargain play here.
So what do you think? Can the banks get their act together? Would you invest in health care giants like JNJ? Are railroads doomed thanks to the demise of coal? Any other messages you’re distilling from the flood of earnings reports?
Give me a shout at the Money and Markets website and I’ll do my best to help you sort through things!
|Our Readers Speak|
The candidacy announcements from Hillary Clinton and Marco Rubio really got the conversation fired up over at the website. The general consensus? Hillary would be a bad president, while Rubio might be a decent one.
Reader R.G. said: “I wouldn’t trust Hillary in any way, shape or form for any reason. As for Rubio, I like what I see and hear of, about, and from him. He’s young, fresh, energetic, intelligent, articulate … and actually knows and understands the Constitution, the Bill of Rights and how government is actually supposed to work. I was becoming worried there were none left in Washington that know or understand those things.”
Reader R.J.F. said: “Hillary is trying to sell herself as a ‘Populist,’ while courting Wall Street and other big money supporters. So she’ll hose the middle class as much as Obama has.
“Unfortunately, I haven’t seen any announced or potential Republican candidates that excite me, or that can beat Hillary. Perhaps that will change before the election.”
Reader Howard picked up on another message from many of you — It’s time to move on! He said: “America has had two decades of Bush and Clinton and now we have more debt, poverty and loss of jobs than before. We need someone new.
“I listened to Rand Paul’s self-nomination speech. A doctor who restored the sight of the sight impaired. He has a vision to restore America to our Constitution and our Bill of Rights. I’m not saying he is the best or only candidate, but we desperately need change. Clinton and Bush are just interested in a selfish version of what this country can offer them.”
Reader Charlie added: “It would be nice to move on from the Clintons and the Bush party, but sadly, the media can’t let them go. Just like they cannot stop talking about the Kennedys. I mean, c’mon, that was 52 years ago!
“I would hope for real leadership, not necessarily TV-charismatic actors acting as leaders, to achieve a more egalitarian, global, ‘one world’ for our today and tomorrow. The Presidency is about bipartisan leadership — not an award show.”
Keep those comments coming, because the political backdrop is only going to get more interesting and impactful to investors as 2015 rolls on! Here’s the link if you haven’t taken advantage of it yet.
|Other Developments of the Day|
Alcatel? Lucent? Nokia? I feel like I’m caught in a time warp and back in the late-1990s/early-2000s telecom/networking bubble again! But sure enough, beaten-down Nokia (NOK, Weiss Ratings: B) is reportedly in talks to buy Alcatel-Lucent (ALU, Weiss Ratings: C-) for an undisclosed price.
A combination of the two firms would create a tech giant with around $26 billion in annual sales and more than 100,000 employees. Punch up a weekly chart of ALU just for fun, and you’ll see it traded in the $80s during the tech bubble. It’s going for the low single-digits now.
Don’t look now, but oil and gas production in key U.S. shale regions is peaking — and you couldn’t ask for a bigger bullish signal for crude! Of course, you won’t hear this news from the Negative Nellies on TV. They keep saying we’ll be swimming in oil until 2100, and will soon be paying $5 a barrel!
But according to the Energy Information Administration (EIA), production from the Bakken Shale in North Dakota is going to fall 23,000 barrels per day next month. The Eagle Ford in Texas? Down 33,000 BPD.
And given the huge, swift decline in rig counts, you can bet those numbers will fall even further before long. Maybe that’s why crude is closing in on a fresh multi-month high again!
Iraqi forces, Kurdish soldiers, and Shiite militia fighters are pushing ISIS militants back, aided by ramped-up U.S. airstrikes. That’s the optimistic assessment by the Pentagon, which says ISIS has lost a quarter of the territory it seized last year in Iraq.
Talk about getting caught napping on the job! An Alaska Airlines baggage handler apparently tried to get some shuteye while loading cargo on a flight from Seattle to Los Angeles. But he woke up after take off, banged away at the floor of the plane, and was rescued after the pilot turned the plane around and landed safely. Oops.
Do you have any thoughts on these articles, or others that caught your eye in the past 24 hours? Then share them at the website!
Until next time,