Wall Street is gearing up for a promising start, with futures up 1.6% for the Dow Jones and the S&P 500, and up 1.8% for the Nasdaq, buoyed by robust bank earnings that have officially kicked off the earnings season and lower-than-expected CPI data for November. Across the Atlantic, European markets are also showing signs of optimism, with indices like the CAC 40, Dax, and FTSE all in the green.
Investors received some good news with the U.S. consumer price index (CPI) data, which showed a 2.9% year-on-year increase for December, up from 2.7% in November, but in line with expectations. But what's more, core inflation, excluding the most volatile items, came in at 3.2% year-on-year, while the forecast was for it to remain stable at 3.3%. This figure is crucial for the Federal Reserve's 2025 monetary policy. At the moment, traders only anticipated one rate cut this year following strong December employment figures. They are now hoping that the benign inflation data will allow for more rate cuts.
Meanwhile, in Europe, sluggish economic activity and upcoming inflation data could influence the European Central Bank's interest rate decisions. The bond market is experiencing a slight easing of yields, while the currency market sees the yen strengthening and the dollar weakening ahead of the inflation data.
Yesterday, the US producer price index for December also came in slightly weaker than expected, though still high at 3.3%. Investors concluded there was no uncontrolled slippage, but this didn't trigger euphoria either. Wall Street attempted a vigorous rebound but struggled to maintain momentum, as technology stocks suffered and the healthcare sector was hit by a 6.6% drop in Eli Lilly's shares, following disappointing sales prospects for its anti-obesity treatment. In Europe, indices rebounded weakly, particularly affected by the Eli Lilly shockwave, which also impacted Novo Nordisk, despite its status as the largest capitalization on the continent.
The first wave of Q4 2024 results from major US banks was also released today. JPMorgan Chase, Wells Fargo, Goldman Sachs, and BlackRock posted solid results. Goldman Sachs has been busy counting its blessings—or rather, its billions. The financial giant reported a profit surge in the fourth quarter of 2024, with earnings more than doubling to a hefty $4.11 billion, up from the previous year's $2.01 billion. The catalyst? A 24% boost in investment banking fees and a 33% revenue increase in its global banking and markets division. JPMorgan Chase also had reason to celebrate, with net profit jumping by 50% to $14 billion. Meanwhile, BlackRock, the world's asset management behemoth, reported a 29% rise in adjusted net profit to over $1.87 billion, with revenue increasing by 23% to $5.68 billion. CEO Laurence Fink highlighted the firm's record organic growth and successful integration of high-growth acquisitions. Wells Fargo's results were steady, with net profit climbing to $5.08 billion, though revenue slightly dipped to $20.38 billion from $20.48 billion.
The news is also dominated by looming trade restrictions. Bloomberg has revealed that the USA is pressuring South Korea and Taiwan to reduce exports of Samsung and TSMC chips to China. Meanwhile, Europe plans to gradually ban purchases of Russian LNG and aluminum. In the Asia-Pacific region, performance was mixed this morning. Japan's Nikkei 225 lost 0.1%, and Australia's ASX 0.2%. Indices remained fairly stable in South Korea and Hong Kong, while India managed a 0.1% gain. Taiwan suffered the most, weighed down by its star TSMC following the aforementioned rumor. European indices are in the green, with the Stoxx Europe 600 rising 1.2%.
Today's economic highlights
Inflation data for the UK, France and the USA are on the calendar, along the Empire State index and oil inventories. See the full calendar here.
- Dollar: EUR 0.9711 GBP 0.8189
- Ounce of gold: USD 2684
- Brent crude: USD 80.25 WTI: USD 77.92
- 10-year US bond: 4.77
- Bitcoin: USD 97,000
In corporate news:
- Boeing delivered 348 commercial aircraft in 2024, half as many as Airbus.
- Pfizer has sold 700 million shares in Haleon for approximately GBP 2.57 billion, reducing its stake to around 7%, amidst a broader decline in healthcare stocks and ongoing legal appeals related to a past insider trading settlement.
- Eli Lilly struggles on the stock market due to slowing sales growth of its anti-obesity drug.
- Wells Fargo faces regulatory penalties totaling $18.5 million against three former executives for fraudulent sales practices, even as the bank reports a fourth-quarter profit that surpassed Wall Street expectations due to a rebound in dealmaking activity.
- Meta cuts around 5% of its workforce, targeting underperformers.
- Mark Wiedman, a senior executive at BlackRock, is leaving the firm as it reports a record high of $11.6 trillion in assets and a 23.5% year-over-year increase in Q4 adjusted earnings, surpassing estimates with earnings of $11.93 per share, amidst financial markets rallying ahead of earnings and political events.
- KKR is being sued by the U.S. Department of Justice for allegedly making improper pre-merger filings and evading antitrust scrutiny, facing a lawsuit worth $650 million.
- JPMorgan Chase achieved a record annual profit, bolstered by a strong economy, interest rate cuts, and market rebounds, alongside promoting Jennifer Piepszak to COO and reporting better-than-expected Q4 earnings and revenue, which contributed to a 1% rise in financial stocks including the NYSE Financial Index and the Financial Select Sector SPDR Fund.
- Nvidia CEO Jensen Huang visits China despite US export restrictions.
- Goldman Sachs experienced a significant increase in Q4 2024 profits, primarily fueled by robust investment banking and trading activities, leading to higher-than-expected earnings and revenue, and prompting the firm to raise bonuses for dealmakers by up to 15% amid a positive outlook for mergers and acquisitions in 2025.
- Canada authorizes the $34 billion Bunge-Viterra merger, subject to certain conditions.
- The FTC prepares to sue Deere for its equipment repair practices, according to Bloomberg.
- Microsoft halts hiring in its U.S. consulting unit to cut costs, according to CNBC.
- The US Securities and Exchange Commission sued Tesla CEO Elon Musk for not disclosing his Twitter stake on time.
Today's main earnings reports: JPMorgan Chase, Wells Fargo, Goldman Sachs, BlackRock, Citigroup, Bank of New York...
Analyst recommendations:
- Adobe Inc.: BNP Paribas Exane upgrades to neutral from underperform with a target price of USD 425.
- Digital Realty Trust, Inc.: Deutsche Bank upgrades to buy from hold with a target price raised from USD 185 to USD 194.
- Intuit Inc.: BNP Paribas Exane downgrades to underperform from neutral with a price target reduced from USD 610 to USD 530.
- Wayfair Inc.: Baptista Research downgrades to hold from buy with a target price reduced from USD 50.50 to USD 48.90.
- Weyerhaeuser Company: CIBC Capital Markets upgrades to outperform from neutral with a target price reduced from USD 36 to USD 35.
- Xpo, Inc.: Stifel downgrades to hold from buy and reduces the target price from USD 131 to USD 124.
- Coinbase Global, Inc.: US Tiger Securities, Inc. maintains its hold recommendation with a price target reduced from USD 350 to USD 265.
- Exelixis, Inc.: JMP Securities maintains its market outperform recommendation and raises the target price from USD 34 to USD 41.
- Moderna, Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from 70 to USD 38.
- Netflix, Inc.: BMO Capital Markets maintains its outperform rating and raises the target price from USD 825 to USD 1000.
- Rayonier Inc.: Citigroup remains neutral recommendation with a price target reduced from USD 32 to USD 25.
- Tesla, Inc.: Haitong International Research Ltd maintains its outperform recommendation and raises the target price from USD 221 to USD 464.30.
- The Trade Desk, Inc.: BMO Capital Markets maintains its outperform recommendation and raises the target price from USD 125 to USD 160.
- Walgreens Boots Alliance, Inc.: RBC Capital maintains its sector perform recommendation with a price target raised from 9 to USD 12.
- Anglo American Plc: RBC Capital downgrades to underperform from sector perform with a target price reduced from GBX 2400 to GBX 2200.
- Pearson Plc: Bernstein downgrades to market perform from outperform with a target price raised from GBX 1225 to GBX 1330.
- Persimmon Plc: Peel Hunt upgrades to buy from hold with a target price reduced from GBX 1410 to GBX 1300.
- Standard Chartered Plc: Redburn Atlantic upgrades to buy from neutral with a price target raised from GBX 850 to GBX 1250.
- Sun Life Financial Inc.: National Bank Financial upgrades to outperform from sector perform with a price target raised from CAD 82 to CAD 95.