Bank reports will show strength of economy
2023.01.13 11:05
Bank reports will show strength of economy
By Tiffany Smith
Budrigannews.com – Investors are relieved that inflation in the United States is falling as quickly as the markets had anticipated; however, they must now determine how the largest lenders in the country are coping with the economic slowdown and the higher interest rates that are keeping prices under control.
JPMorgan (NYSE:), which is officially kicking off the corporate results season for the fourth quarter, NYSE: Citigroup, NYSE: Bank of America, NYSE: Bank of New York Mellon likewise Wells Fargo are among the largest banks in the nation updating on Friday.
Fingers crossed that there won’t be a “Friday 13th” surprise in the earnings readouts given that news of another sharp drop in annual U.S. inflation last month brought gains in Wall Street stock indices to more than 5% for the first two weeks of the year.
As they stockpile emergency funds to prepare for the economic slowdown that is affecting investment banking, the big banks are expected to report lower profits in the fourth quarter. To prepare for bad loans, it is anticipated that the six largest lenders will accumulate a combined $5.7 billion in reserves—double the $2.37 billion set aside last year.
After Goldman Sachs (NYSE:), any additional indications of staff reductions will also be closely monitored. as well as BlackRock (NYSE:) were the most recent to lay off hundreds of bankers this week.
The first decline since the pandemic recession in 2020 is anticipated to have been a 2.2% decline in overall earnings.
However, the optimism regarding peak inflation and Federal Reserve interest rates will require a twist. The “fear index,” a measure of how volatile U.S. stocks are, has fallen to its lowest level since April and is now only about half as high as it was in February.
Markets now seem almost certain that the Fed will downshift its rate hikes to a quarter point increase next month following the widely anticipated inflation readout in December. Futures markets still anticipate that rates will fall below 5% by the middle of the year and that there will be half-point rate cuts between then and the end of the year.
On Friday, ten-year yields on the United States Treasury fell to their lowest level in a month, and the dollar continued to bear the brunt of the “peak Fed” narrative, falling to its lowest level against the euro and Japan’s yen since May.
The idea that the Bank of Japan might change its ultra-loose monetary policy once more at the policy meeting next week sent the yen skyrocketing. On Friday, the benchmark yield on Japan’s 10-year government bonds exceeded the central bank’s new limit of 0.5 percent, placing additional pressure on the BOJ to either crap or modify its yield cap policy.
Markets in China are already benefiting from new year’s optimism regarding China’s reopening, but the damage is still being documented with negative December trade numbers. However, the country’s tech industry received better news.
In yet another sign that their two-year regulatory crackdown on the technology sector is coming to an end, Chinese authorities are set to reinstate Didi Global’s ride-hailing and other apps on domestic app stores as soon as next week.
NASDAQ: Tesla After the automaker slashed prices on its electric vehicles in the United States and Europe by as much as 20%, extending an aggressive discounting strategy after missing Wall Street estimates for 2022 deliveries, shares dropped about 5% before the market opened.
As cryptocurrency exchanges face industry-wide challenges brought on by the collapse of FTX last year, the so-called crypto winter still appears to be colder than the real thing, with Singapore-based Crypto.com laying off approximately 20% of its workforce.
Later on Friday, a variety of events and data releases may offer markets around the world some direction:
* Import/export prices in December in the United States, consumer sentiment in January from the University of Michigan * Neel Kashkari, president of the Minneapolis Federal Reserve, and Patrick Harker, chief of the Philadelphia Fed, speak. At the White House, U.S. Vice President Joe Biden meets with Japan’s Prime Minister Fumio Kishida. First Republic Bank (NYSE:), BlackRock, JPMorgan Chase, Citigroup, Bank of America, Bank of New York Mellon, Wells Fargo, NYSE: Delta Air Lines, NYSE: UnitedHealth Group.
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