Morning Minutes 7/14/2020

Morning Minutes

Earnings Season Starts and Economic News Resumes

July 14, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Coming off of a mixed day for US markets that saw the Dow finish flat and the NASDAQ stage a 2.1% correction, overseas markets sold off overnight but have started to bounce back this morning.

There has been a lot of market moving news over the last 24 hours with the potential for more developments as the week progresses.  Yesterday’s news of some businesses being reclosed in renewed shut-ins in California reminded investors of the bumpy road ahead with the potential for both advances and setbacks.

Asia Pacific markets retreated moderately with the Hang Seng sliding 1.1%, while Tokyo and Shanghai fell 0.8%. China reported a smaller than expected trade surplus for June ($46.4B vs street $58.6B) as both exports (0.5% vs street -1.5%) and particularly imports (2.7% vs street -10.0%) surprised to the upside. In Europe today, the Dax has dropped 1.3% while the FTSE is down 0.3%. UK monthly GDP rose by 1.8% in May after a 0.3% plunge in April, but the bounce was smaller than the 5.0% the street had been hoping for.

In North America today, the focus is on US bank results as earnings season kicks off. Highlights include:

Citigroup beat the street on EPS ($0.50 vs street $0.28) on stronger than expected revenues from bond, currency and commodities trading ($5.6B vs street $4.8B). Management noted that results were down from a year ago due to a higher cost of credit and increased loan loss provisions.

JPMorgan Chase EPS ($1.38 vs street $1.04) and revenues ($33.0B vs street $30.3B) beat expectations boosted by an 80% increase in revenues from equity and bond trading. Banking results were impacted by an $8.9B loan loss provision.

Wells Fargo reported sales ($17.8 vs street $18.4) and losses per share (-$0.66 vs street -$0.20) that were worse than expected mainly due to an $8.4B loan loss provision. The bank also slashed its quarterly dividend to $0.10 from $0.51.

More results are due from US financials tomorrow, with Goldman Sachs headlining, along with two central bank meetings, the Bank of Japan and the Bank of Canada. No new stimulus is expected from either bank but commentary related to their economies and how ready (or not) they are to take additional action in future could attract attention from investors.

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