Investment banks kick off US earnings season, Ford signs EV battery deal

Stocks slipped Thursday as big bank earnings kicked off with disappointing results and traders assessed the possibility of even tighter US monetary policy from the Federal Reserve as recessionary fears lingered.

The Dow Jones Industrial Average shed 0.46 per cent, or 142.62 points, to 30,630.17, while the S&P 500 dipped 0.3 per cent to 3,790.38. The Nasdaq Composite inched 0.03 per cent higher to finish at 11,251.19.

Stocks closed in negative territory but well off their lows. At one point, the Dow plummeted as much as 628 points, while the Nasdaq and S&P 500 fell more than 2 per cent each. Equities were on track to close out the week in negative territory.

One strategist said, “If the banks are a barometer of the whole economy as well as what we’re likely to get from other earnings reports going forward, it’s going to be an ugly quarter.”

It appears that talk of a US recession has only this month been on consumers’ minds — going by Google searches during July. For many younger investors a recession is not an environment that have been used to.

Earnings results from major banks on Thursday offered further clues into the health of the US economy.

JPMorgan Chase reported earnings this morning that were lower than forecasts, as it set aside bigger reserves to cover bad loans, a possible ominous sign for the rest of the banking sector. Its buyback suspension was also a big story. 

Continuing the trend, Morgan Stanley shares slipped about 0.4 per cent on the back of a sharp decline in investment banking revenue, while Goldman Sachs, which is set to report earnings Monday, fell nearly 3 per cent. Earnings from big banks will continue on Friday with results from Wells Fargo and Citigroup.

The results from bank stocks raised further concerns that earnings estimates have perhaps risen too much in recent months. It now appears the market is finally concerned about the fact that earnings estimates, having gone up almost nonstop during the first half of this year, will now have to come down.

Across the sectors last night energy, materials and financials were among the S&P 500’s worst-performing sectors.

Big tech stocks were mixed on Thursday, with information technology up nearly 1 per cent. Shares of Apple added 2 per cent. Qualcomm and Applied Materials were higher.

In electric vehicle battery news, Ford Motors and Korea’s SK Innovation sealed the deal on the creation of a joint venture that will bring more battery production capacity to the US and feed the Detroit car company’s ambitions as a maker of electric cars. Ford will spend roughly $6.6 billion over the coming five years. Battery production should start around 2025, helping Ford meet its goal of selling two million EVs globally a year by 2026.

In crypto news, crypto lender Celsius has filed for bankruptcy. The move comes a month after it froze withdrawals, raising the prospect that more than a million account holders will not be able to get their money back. An outflow of money from crypto investments has shaken the foundations of crypto banks and start-ups.

Bitcoin futures were up 5.2 per cent. 

One Australian dollar has weakened slightly compared to the US dollar yesterday, buying 67.51 US cents with the US Dollar index up 0.6 per cent on broad strength.

In Australia today, the very strong June labour force data has made a rate increase certain when the Reserve Bank meets on August 2. It is now just a debate about the size.

The SPI futures are pointing to a 0.8 per cent loss today, giving back yesterday’s gains with the resource sector expected to be under pressure.

 

The SPI futures are pointing to a 62 point fall.

Figures around the globe

US markets closed mixed. The Dow Jones fell 0.5 per cent to 30,630, the S&P 500 lost 0.3 per cent to 3,790 and the Nasdaq gained 0.03 per cent to 11,251.

Across the Atlantic, European markets closed lower. Paris fell 1.4 per cent, Frankfurt lost 1.9 per cent and London’s FTSE closed 1.6 per cent lower.

Asian markets closed mixed. Tokyo’s Nikkei gained 0.6 per cent, Hong Kong’s Hang Seng lost 0.2 per cent and China’s Shanghai Composite lost 0.1 per cent.

Yesterday, the Australian sharemarket closed 29 points or 1.2 per cent higher at 6,651.

Dividends payable

There are a number of companies set to pay eligible shareholders today, including:

Garda Diversified Property Fund (ASX:GDF)
KKR Credit Income Fund (ASX:KKC)
Qualitas Real Estate Income Fund (ASX:QRI)
Russell Investments High Dividend Australian Shares ETG (ASX:RDV)
Russell Investments Australian Government Bond ETF (ASX:RGB)

Commodities

Iron ore is trading 8.4 per cent lower at US$100.25 a tonne.

Iron ore futures are pointing to a 6.6 per cent fall.

Gold lost $29.70 or 1.71 per cent to US$1705.80 an ounce.

Silver was down $0.05 to US$18.23 an ounce.

Copper was down $11.10 or 3.34 per cent to US$321.15 a pound.

Oil fell $0.52 or 0.54 per cent to US$95.78 a barrel.

Currencies

One Australian dollar at 7:10 AM has weakened slightly compared to the US dollar yesterday, buying 67.51 US cents (Thu: 67.66 US cents), 56.11 Pence Sterling, 93.79 Yen and 67.38 Euro cents.

Over the past 24 hours, Bitcoin gained 4.7 per cent to US$20,653.28.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.