Morning Wrap: US stocks ease, JPMorgan and Citi top earnings estimates, ASX 200 futures higher

Major US benchmarks ease amid a choppy session last Friday, JPMorgan profits jump 52% as customers flocked to larger banks, BlackRock revenues fall 10% but cites robust inflows amid banking turmoil, US retail sales tumble more than expected down 1.0% month-on-month and gold prices pull back sharply.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 fades early gains to close at the midpoint (Source: TradingView)

MARKETS

• S&P 500 and Nasdaq post positive weekly gains for four of the last five weeks

• Volatile session on Friday, benchmarks higher in early trade but fade gains, closed at midpoint of intraday ranges

• Fed rate probabilities for 25 bp hike jump to 98.4% (CME)

• Fed Waller says not much progress made on inflation, higher rates needed (Reuters)

• Yellen says tightening lending requirements may substitute for Fed rate hikes (CNBC)

• Ongoing debt-ceiling fight likely to disrupt the portfolios of money-market funds (FT)

• Bond investors to scour bank results for signs of increased stress (Bloomberg)

EARNINGS

6% of S&P 500 companies have reported first quarter earnings, with 90% beating consensus EPS expectations (vs. five-year average of 77%) and 63% have surpassed revenue expectations (vs. five-year average of 69%).

JPMorgan (+7.6%) had its largest upside reaction to earnings in more than 20 years. Earnings beat analyst estimates, deposits rose and the bank raised its full-year net interest income guidance.

• "... We saw significant new account opening activity and meaningful deposit and money market fund inflows most significantly in the commercial bank, business banking, and AWM.” – CFO Jeremy Barnum 

• “Both [consumer and small businesses] continue to show resilience and remain on the path to normalisation …. but we continue to monitor their activity closely. Spend remains solid and we have not observed any notable pullback throughout the quarter.” - Barnum

• "JPMorgan beat 1Q23 expectations by about 20-25% due to higher NII, which is now guided almost 10% higher for 2023 even while expense guidance is unchanged. JPMorgan reflects out theme that 'Goliath is Winning' in terms of growth, scale and resiliency." - Wells Fargo

Citi (+4.8%) beat earnings, net interest income and net interest margin expectations, reaffirmed its FY23 outlook. 

• “We expect the recent events to be disinflationary and credit to contract. We believe it is now more likely that the U.S. will enter into a shallow recession later this year.” - CEO Jane Fraser

Blackrock (+3.1%) first quarter revenue fell 10% and net income was down 19% but ahead of analyst expectations. Assets grew to US$9.09tn as stock and bond markets rallied, depositors moved funds from US banks. 

• "In March, BlackRock saw over $40bn of net inflows into our cash management strategies. We expect to shift from deposits to money market funds to be a longer-term trend …” – CEO Larry Fink 

BANKING CRISIS

• Banks reduced borrowings from Fed backstop lending facilities for a fourth straight week

• Emerging liquidity to banks via discount window and BTFP fell to US$139.5bn on April 12 from US$148.7bn a week ago and US$165bn in mid-March

• Bank sector stabilisation further evidenced by modest inflows into money market funds, down to US$25.4bn for the week ending March 22, from highs of US$100bn for both the last two weeks of March

ECONOMY

• US retail sales fell 1.0% MoM in March, steeper than the 0.4% expected (Bloomberg)

• German wholesale prices ease to 2% YoY from 8.9% in February (Reuters)

• US consumer sentiment inches higher in April, above market expectations (Bloomberg)

• Companies have invested ~US$200bn in US manufacturing projects since the passage of Inflation Reduction Act subsidies last year (FT)

• Softness in the global diesel market could be an early recession signal (Bloomberg)

Deeper Dive

Sectors to Watch

Pretty choppy overnight session. Expect volatility to be further exacerbated by US earnings season.

Gold: Spot prices fell 1.8% last Friday from US$2,040 to US$2,004 amid a jump in bond yields and bounce for the US Dollar Index. Price action was volatile for gold equities, with the VanEck Gold Miners ETF down 2.2% from session lows of -4.15%.

Materials: The US Dollar Index bounce weighed on commodity markets, with copper closing 0.4% lower from session highs of 1.7%. Iron ore price also softer. US-listed BHP and Rio Tinto both fell around 1.8% overnight.

Financials: Financials was the best performing S&P 500 sector, up 1.05%. Could the strength behind US bank earnings see some positive flow for local names?

Nickel: Bloomberg Nickel Subindex ETN (tracks the performance of nickel future contracts) up 3.1% overnight to a six week high. Prices are trying to bottom, up almost 10% from late March lows.

Charts of Interest: S&P 500 earnings growth

The Energy sector is expected to flag the worst earnings per share growth over the coming year as oil prices ease. On the flip side, discretionary earnings are forecast to rise the most.

Source: Wisdom Tree

ASX corporate actions occurring today:

• Trading ex-div: New Hope Corp (NHC) – $0.40 

• Dividends paid: Nufarm (NUF) – $3.68

• Listing: None

Economic calendar (AEST):

No major economic announcements.