Friday, April 12, 2013JPMORGAN CHASE (JPM): Free Stock Analysis
ReportSPDR-SP 500 TR (SPY): ETF Research ReportsWELLS FARGO-NEW (WFC): Free Stock Analysis
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Stocks will likely take a pause today after making another
all-time high the day before in response to soft economic data and
less than impressive earnings results from J.P.
Morgan ( JPM ) and Wells
Fargo ( WFC
). Investors have been shrugging all evidence of economic weakness
in the hope that it guaranteed continued Fed support, but it
nevertheless raises doubts about the rally's staying power.
The Retail Sales numbers came in weaker than expected, both on the
'headline' as well as the ex-gasoline and ex-automobile components.
The expectation was for March Retails Sales growth to be in the
negative territory after the strong gain in February, but the
growth rate turned out be even weaker than that. This data adds to
evidence from other sources that is pointing towards renewed
weakness in the economy after the strong momentum in January and
February. Last week's two ISM surveys and the March non-farm
payroll report all pointed towards an economy that was losing
The J.P. Morgan and Wells Fargo results are by no means bad - the
former beat strongly on EPS and modestly on revenue, while the
latter missed on revenue but came ahead on earnings. But these are
not just any other big banks - these two represent the best of the
lot. And in that context, the quality of the 'beats' were somewhat
underwhelming. Reserve releases played a big role in the beats,
which takes some of the sheen off their positive surprises. That
said, investment banking was quite strong at JP Morgan, while
mortgage banking at both firm appear to be losing some of its
momentum. This will likely be the recurring theme as bank earnings
season ramps up next week.
Overall, total earnings from the Finance sector are expected to be
down from the same period last year due to tough comparisons. Total
earnings for the 31 companies in the S&P 500 that have already
reported Q1 results as of this morning are up +13.8% from the same
period last year, a lower earnings growth pace than what these same
companies achieved in Q4 (+17.1%). These growth rates will come
down in the coming down as the Q1 earnings season heats up as total
earnings for the S&P 500 as a whole are expected to be down
-2.2% in Q1 after the +2% gain in 2012 Q4.
Director of Research