Earnings don’t start until the big banks report

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Banks start making profits
Four of Wall Street’s major banks reported earnings on Friday. C. B. Morgan Chase It started things off with lower profits in the fourth quarter as it paid a $2.9 billion charge tied to the government’s takeover of some regional banks last year. Citigroup It reported a quarterly loss of $1.8 billion, while also announcing it would cut 10% of its workforce. Bank of America Fourth-quarter net income fell more than 50% from a year ago, while… Wells Fargo It reported higher quarterly profits but warned of lower interest income this year.

Positive inflation signal?
The unexpected decline in wholesale prices indicated that inflation may decline for good. The Labor Department’s Producer Price Index fell 0.1% in December, versus a 0.1% rise expected by economists surveyed by Dow Jones. Producer Price Index data measures inflation from the perspective of the product or manufacturer.

Markets rose this week
Blue chip Dow Jones Industrial Average It fell more than 100 points on Friday but closed up 0.3% for the week. the Standard & Poor’s 500 And the Nasdaq It closed the day almost flat, while ending the week higher as well. Markets have digested the start of earnings season and the unexpected decline in producer prices. European stocks ended higher, but shares of the British luxury goods company barbaric It fell 7% after a profit warning.

China skeptics win Taiwan elections
Taiwan President Lai Ching-te won the island’s presidential elections on Saturday. This is the third consecutive victory for the Democratic Progressive Party. Lai, seen as a staunch China skeptic, won more than 40% of the popular vote. He said he was “determined to protect Taiwan from threats and intimidation from China.” Beijing rejected his victory.

(PRO) Buffett’s view on airlines
Wall Street legend Warren Buffett will likely never add airline stocks to his portfolio again. The “Oracle of Omaha” has been quick to unload $4 billion worth of airline stocks in the pandemic, and more recently with disappointing earnings forecasts, more plane groundings and weather emergencies, it won’t give such stocks a chance again.

Fourth-quarter earnings have officially begun with four of Wall Street’s six largest banks reporting rather bleak results.

JPMorgan Chase, the largest US bank by assets, paid large fees linked to government seizures linked to the regional banking crisis last March, which affected its profits.

“The US economy remains resilient, with consumers continuing to spend, and markets currently anticipating a soft landing,” CEO Jamie Dimon said.

But he added that leveraged spending and supply chain adjustments “may lead to inflation being more persistent and interest rates being higher than markets expect.”

Citigroup was also hit by last year’s regional banking crisis, but the focus has mostly been on CEO Jane Fraser’s massive reform plan aimed at boosting sentiment about the bank’s financial health as well as its share price.

The third-largest US bank by assets said it would cut about 20,000 jobs in the “medium term,” but did not immediately clarify the exact duration. Citigroup has lagged behind its Wall Street peers since the 2008 financial crisis, and remains the least valued among the Big Six banks.

Outlook from Wall Street’s largest lenders was cautious on the back of markets pricing in interest rate cuts by the Federal Reserve as early as March. Low interest rates hurt the net interest income generated by banks.

Separately, data showing lower wholesale prices came as a positive surprise. This came a day after the prices paid by consumers for goods and services rose by 0.3% in December, and by 3.4% on an annual basis. It is still well above the Fed’s 2% target for this year.

“It is clear that the remaining inflation risks in the US economy cannot be due to any upward pressure in producer costs,” said Curt Rankin, chief economist at PNC.

“Whether surveyed from an intermediate or final producer demand perspective, there is little or no pricing pressure heading into the U.S. economy from the supply side entering 2024.”