Stocks flat as investors weigh mega bank earnings

U.S. stocks resumed losses on Thursday after a rally in the previous session on hopes for an earnings season boost to markets. Investors are digesting a flurry of mixed quarterly reports from Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup (C).

The S&P 500 fell 0.9%, heading towards another week of losses. The Dow Jones Industrial Average retreated from a slight advance earlier in the session to hover below the flatline. The Nasdaq Composite tumbled 1.7%, reversing gains from a 2% jump Wednesday in its best session since March 18. Meanwhile, Treasury yields pushed forward, with the 10-year benchmark back above 2.7%.

Shares of Twitter (TWTR) surged as much as 13% in early-hour trading after Tesla CEO Elon Musk offered to buy the social media giant for $54.20 per share, or about $41 billion in cash, a new SEC filing on Thursday showed. Musk said the social media company he has often criticized must go private in order to make effective changes.

Sentiment on Wall Street recovered Wednesday after inflation data spooked investors to start the week. Traders weighed a flurry of first quarter earnings from JPMorgan Chase (JPM), Delta Air Lines (DAL) and Bed, Bath & Beyond (BBBY).

Delta rose 6.2% despite another loss in its quarterly results after the airline said it returned to profitability in March following an Omicron hit on business and predicted revenue will reach between 92% and 97% of pre-pandemic levels this quarter. Meanwhile, JPMorgan shares closed down 3.2% to the lowest level since January 2021 after the largest U.S. bank by assets reported a 42% drop in profit from last year on losses tied to higher inflation and Russia’s war in Ukraine. Bed, Bath & Beyond also faltered after it missed sales expectations.

The initial batch of reports preface a milder quarter for earnings growth than previous periods. However, earnings are expected to be a bright spot for investors who much of this year so far have grappled with sharp market swings tied to worsening geopolitical risk, inflationary pressures and fears monetary tightening may prompt an economic contraction as the Federal Reserve sets out on its rate hiking plans.

Analysts have tempered their expectations on first quarter earnings, lowering bottom-up EPS forecasts in aggregate for the Q1 by 0.7% from $52.21 to $51.83, according to data from FactSet. On the other hand, EPS forecasts for the second quarter are up by 1.6% from $55.16% to $56.07, by 2.4% from $57.82 to $59.23 for the third quarter, by 3.9% from $58.31 to $60.59 for the fourth quarter and by 2.0% from $223.43 to $227.80 for 2022 overall.

Economists at Bank of America in a note out this week also predicted a resilient earnings quarter despite grim macroeconomic headlines throughout the period.

“Leading signals and early reporters suggest a high likelihood of an EPS beat in Q1,” BofA said, adding the financial institution expects a 4% beat, or $53.50 vs. consensus $51.54. However, the bank warned analyst expectations for record margins in the coming quarters were “too high.”

“History suggests that oil shocks spawn weaker consumption with a three-to-four quarter lag, indicating a 2H slowdown,” the note said.

12:51 p.m. ET: All three indexes stumble to turn negative in intraday trading

Here were the main moves in markets as of 12:51 p.m. ET:

  • S&P 500 (^GSPC): -37.81 (-0.85%) to 4,408.78

  • Dow (^DJI): -22.15 (-0.06%) to 34,542.44

  • Nasdaq (^IXIC): -234.79 (-1.72%) to 13,408.79

  • Crude (CL=F): +$0.36 (+0.35%) to $104.61 a barrel

  • Gold (GC=F): -$11.60 (-0.58%) to $1,973.10 per ounce

  • 10-year Treasury (^TNX): +12.3 bps to yield 2.8100%

11:30 a.m. ET: Consumers are slightly more optimistic in early April

U.S. consumer sentiment unexpectedly bounced back in early April from a decade low, lifted by a positive outlook for wage growth amid a strong labor market and a decline in gasoline prices curbing some inflation worries.

The University of Michigan’s Consumer Sentiment Index climbed to 65.7 on a preliminary basis this month from a final reading of 59.4 in March, the lowest since 2011. Economists surveyed by Bloomberg expected a reading of 59.

The improved outlook was boosted by a 29.4% jump in the economic view for the year ahead and a 17.2% increase in personal financial expectations, according to survey Director Richard Curtin.

“A strong labor market bolstered wage expectations among consumers under age 45 to 5.3% – the largest expected gain in more than three decades, since April 1990,” he noted in a statement.

10:25 a.m. ET: Mortgage rates hit 5% to mark highest level in more than a decade

Mortgage rates have logged a stunning climb since the start of 2022, with the rate on the most common home loan hitting a whopping 5% this week — the highest level since February 11.

The rate on the 30-year fixed mortgage jumped to 5% from 4.72% last week, according to Freddie Mac. A year ago at this time, the 30-year borrowing cost averaged 3.04%.

In the last five weeks alone, the rate has climbed 1.24 percentage points and is 1.89 points higher than at the end of 2021.

“This week, mortgage rates averaged five percent for the first time in over a decade,” said Sam Khater, Freddie Mac’s Chief Economist. “As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation.”

9:30 a.m. ET: Stocks flat as investors digest bank earnings

Here were the main moves at markets at the start of Thursday’s trading session:

  • S&P 500 (^GSPC): +4.82 (+0.11%) to 4,451.41

  • Dow (^DJI): +141.03 (+0.41%) to 34,705.62

  • Nasdaq (^IXIC): -12.24 (-0.09%) to 13,631.35

  • Crude (CL=F): -$1.53 (-1.47%) to $102.72 a barrel

  • Gold (GC=F): -$4.20 (-0.21%) to $1,980.50 per ounce

  • 10-year Treasury (^TNX): +3.3 bps to yield 2.7200%

8:58 a.m. ET: Retail sales increase despite soaring price levels

American consumers continued spending in March even amid inflationary pressures that led to a surge in the costs of food, gasoline and other basics.

U.S. retail sales rose 0.5% after logging a revised 0.8% jump from January to February. Wage gains, solid hiring and more money in banking accounts have fueled spending.

January’s increase of 4.9% was the biggest jump in spending since March 2021 when American households received a final federal stimulus check of $1,400.

The Commerce Department reported general merchandise stores saw business up 5.4%, while sales at clothing stores jumped 2.6%. Online sales rose 6.4% and restaurant sales climbed 1%.

8:45 a.m. ET: Another 185,000 Americans filed new claims last week

Applications for unemployment insurance rose slightly more than expected in the latest weekly data but held near a 54-year low set earlier this month.

The Labor Department’s latest weekly jobless claims report showed 185,000 claims were filed in the week ended April 9, coming in just above the 170,000 economists surveyed by Bloomberg had expected.

The prior week’s new claims fell to the lowest level since 1968 at 167,000. That compares to the average of about 218,000 new claims filed per week throughout 2019 before the pandemic.

Given the surge and then decline in jobless claims, the Labor Department has also now reconfigured the way it adjusts the weekly data to account for seasonal factors. Starting last week, the Labor Department returned to using “multiplicative” seasonal adjustment factors for the data. For much of the pandemic, the department had been using “additive” seasonal adjustments that help smooth out large swings in the weekly numbers.

8:15 a.m. ET: Citi profit drops 46% due to loan loss provisions and slower dealmaking

Citigroup (C) logged a 46% plunge in first-quarter profit as it took a hit on provisions for Russia-related losses, a slump in underwriting fees and higher expenses.

The banking powerhouse added $1.9 billion to its reserves in the quarter to prepare for losses from direct exposures to Russia and the economic impact of its war in Ukraine. Citi is the most global of the U.S. banks. The move pushed credit costs to $755 million, a contrast from the $2.1 billion benefit one year ago when it freed up loss reserves built up during the COVID-19 pandemic.

Citi reduced its exposure to Russia to $7.8 billion, from $9.8 billion in December, also lowering its worst-case-scenario loss estimate to no more than $3 billion, down from the nearly $5 billion estimated last month.

Meanwhile, net income fell to $4.30 billion, or $2.02 per share from $7.94 billion, or $3.62 per share, a year earlier.

Shares of Citigroup were up 3% in pre-market trading.

8:03 a.m. ET: Goldman Sachs reports 42% fall in first-quarter profit

Goldman Sachs (GS) saw first-quarter profit halve during the first quarter on a slowdown in capital markets activity from levels in the same period last year that weighed on the bank’s investment banking business.

Profit applicable to common shareholders fell to $3.83 billion, or $10.76 per share, in the quarter ended March 31, from $6.71 billion, or $18.60 per share, a year ago.

Total net revenue fell to $12.93 billion in the quarter, down nearly 27% from last year.

“It was a turbulent quarter dominated by the devastating invasion of Ukraine,” CEO David Solomon said in a statement. “The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore and equity issuance came to a near standstill. Despite the environment, our results in the quarter show we continued to effectively support our clients.”

Goldman Sachs shares were up 1.3% in pre-market trading.

7:52 a.m. ET: Morgan Stanley first-quarter profit slumps 11% on lower trading revenues

Morgan Stanley (MS) reported an 11% drop in its first-quarter profit following a slump in equity underwriting revenue from last year’s highs. The company, however, saw a jump in advisory revenues driven by higher levels of completed M&A transactions.

The mega bank recorded net revenues of $14.8 billion for the first quarter ended March 31, compared to $15.7 billion a year ago. Net income was $3.7 billion, or $2.02 per share, down from $4.1 billion, or $2.19 per diluted share the same period a year ago.

“The Firm delivered a strong ROTCE of 20% in the face of market volatility and economic uncertainty, demonstrating the resilience of our global diversified business,” Morgan Stanley CEO James Gorman said in a statement.

“Institutional Securities navigated volatility on behalf of clients extraordinarily well, Wealth Management’s margin proved resilient and the business added $142 billion net new assets in the quarter, and Investment Management benefited from its diversification,” he said said.

Shares of Morgan Stanley were up 2.3% in pre-market trading.

7:30 a.m. ET: Wells Fargo shares drop after bank reports 21% quarterly drop in profit

Wells Fargo (WFC) reported a nearly 21% drop in first-quarter profit after rising inflation and interest rates, as well as geopolitical turmoil from Russia’s war in Ukraine put a dent in its core business during the period.

The fourth-largest U.S. lender posted a profit of $3.67 billion, or 88 cents per share, for the three months ended March 31, compared to $4.64 billion, or $1.02 per share, over the same quarter last year.

“Our internal indicators continue to point towards the strength of our customers’ financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth,” Chief Executive Charlie Scharf said.

“In addition, the war in Ukraine adds additional risk to the downside.”

Wells Fargo shares were down 3.4% in pre-market trading as of 7:30 a.m. ET.

7:17 a.m. ET: Stock futures little changed as major bank reports trickle in

Here’s where future markets were trading before Thursday’s opening bell:

  • S&P 500 futures (ES=F): -0.50 points (-0.01%) to 4,441.75

  • Dow futures (YM=F): +68.00 points (+0.20%) to 34,550.00

  • Nasdaq futures (NQ=F): +2.75 points (+0.02%) to 14,224.25

  • Crude (CL=F): -$1.20 (-1.15%) to $103.05 a barrel

  • Gold (GC=F): -$6.90 (-0.35%) to $1,977.80 per ounce

  • 10-year Treasury (^TNX): +6.7 bps to yield 2.7800%

7:05 a.m. ET: Elon Musk offers to buy Twitter, discloses plans to take company private

Tesla (TSLA) CEO Elon Musk has offered to buy Twitter (TWTR) for $54.20 per share, or about $41 billion in cash, a new SEC filing on Thursday showed. Musk said the social media company he has often criticized must go private in order to make effective changes.

Musk’s offer price represents a 38% premium to Twitter’s April 1 close, the last trading day before the billionaire revealed he purchased a 9.2% stake in the company.

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote in a letter to Twitter Chairman Bret Taylor, as disclosed in the filing. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”

“My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder,” he added. “Twitter has extraordinary potential. I will unlock it.”

Twitter shares surged 13% in pre-market trading.

6:10 p.m. ET Wednesday: Futures open flat as Wall Street looks ahead to more bank earnings

Here were the main moves in markets heading into overnight futures trading Wednesday:

  • S&P 500 futures (ES=F): -4.00 points (-0.09%) to 4,438.25

  • Dow futures (YM=F): -21.00 points (-0.06%) to 34,461.00

  • Nasdaq futures (NQ=F): -7.50 points (-0.05%) to 14,214.00

  • Crude (CL=F): -$0.23 (-0.22%) to $104.02 a barrel

  • Gold (GC=F): -$3.90 (-0.20%) to $1,980.80 per ounce

  • 10-year Treasury (^TNX): +6.7 bps to yield 2.7800%

NEW YORK, NEW YORK - APRIL 12: American flags are seen waving on the New York Stock Exchange on April 12, 2022 in New York City. Data released this morning showed that inflation rose 8.5 percent in March, the highest annual increase since December 1981, amid energy prices soaring due to Russia's war in Ukraine. (Photo by Michael M. Santiago/Getty Images)

NEW YORK, NEW YORK – APRIL 12: American flags are seen waving on the New York Stock Exchange on April 12, 2022 in New York City. Data released this morning showed that inflation rose 8.5 percent in March, the highest annual increase since December 1981, amid energy prices soaring due to Russia’s war in Ukraine. (Photo by Michael M. Santiago/Getty Images)

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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