As the North American session begins, the JPY is the strongest and the AUD is the weakest. The USD is higher despite a fall in yields. Central-bank divergence is a contributing factor. There is also increased tension in the middle east. Israel is preparing for a possible attack from Iran, which U.S. officials warn could happen imminently, possibly as soon as Friday, according to a report from CBS News. They report that the attack could involve over 100 drones and numerous missiles targeting military sites within Israel. The scale of this attack would pose a significant defense challenge for Israel. Although there's a possibility that Iran might opt for a less severe attack to prevent further escalation, the threat of a major assault remains high. That might explain a higher USD with lower yields.
Yesterday yields did fall after the PPI was less worrisome vs the CPI from the day prior. Fedspeak yesterday was also a bit less anxious perhaps than the markets fear with cuts still expected (at least for now).
Today, Fed's Collins, who will be a voter in 2025, has expressed expectations that inflation pressures will diminish later this year and anticipates around two rate cuts in 2024 (down from 3), although the exact timing of when rate cuts can commence remains uncertain. She also mentioned progress in improving access to the bank discount window. Despite this outlook for rate cuts, Collins highlighted that a rate hike is not part of the baseline expectation but hasn't been completely ruled out either.
The earnings calendar was officially/unofficially (maybe traditionally) kicked off with some of the big financials including JPMorgan Chase, Wells Fargo and Blackrock. Citicorp to come at the top of the hour. Below is the summary:
JPMorgan Chase & Co (JPM)
- EPS: $4.44 (Expected: $4.15) - BEAT
- Revenue: $42.5 billion (Expected: $41.85 billion) - BEAT
- Deposits: $2.43 trillion (Expected: $2.4 trillion) - BEAT
- Net Interest Income (NII): $23.0 billion (Expected: $23.21 billion) - MISS
- Provision for Credit Losses: $1.88 billion (Expected: $2.78 billion) - BEAT
- Full Year NII Projection: $90 billion (Expected: $90.68 billion) - MISS
- Shares are trading -2.11%
Wells Fargo & Co (WFC)
- EPS: $1.20 (Expected: $1.11) - BEAT
- Revenue: $20.86 billion (Expected: $20.2 billion) - BEAT
- Shares are trading up 0.58%
BlackRock Inc (BLK)
- Adjusted EPS: $9.81 (Expected: $9.32) - BEAT
- Revenue: $4.73 billion (Expected: $4.68 billion) - BEAT
- Assets Under Management (AUM): $10.47 trillion (Expected: $10.43 trillion) - BEAT
- Shares are trading up 2.42%
These figures show a mostly positive earnings report for each company with most metrics beating expectations.
Stocks are lower in premarket trading. Shares of Intel and AMD are down on reports that China reportedly told telecom carriers to phase out foreign chips to their networks by 2027. Gold (record highs) and silver higher as they react to geopolitical tensions.
On the economic calendar, US import and export prices will be released at 8:30 AM (import prices expected at 0.3% MoM), along with preliminary University of Michigan consumer sentiment at 10 AM meeting (expectations 79.0 versus 79.4).
A snapshot of the other markets as the North American session begins currently shows.:
- Crude oil is trading up $1.26 at $86.25. At this time yesterday, the price was at $85.70
- Gold is trading up $23.13 or 0.90% at $2394.45. At this time yesterday, the price was $2339.23
- Silver is trading up $0.57 or 2.01% at $28.98. At this time yesterday, the price was at $27.96
- Bitcoin currently trades at $70,852. At this time yesterday, the price was trading at $70,062
In the premarket, the major indices are trading lower:
- Dow Industrial Average futures are implying a decline of -57 points. Yesterday, the index was near unchanged at $38,459.09
- S&P futures are implying a decline of -12.06 points. Yesterday, the index rose 38.40 points or 0.74% at $5199.05
- Nasdaq futures are implying a decline of -67 points. Yesterday, the index rose 271.84 points or 1.68% at 16442.20
The European indices are trading higher:
- German DAX, +0.84%
- France CAC , +0.76%
- UK FTSE 100, +1.43%
- Spain's Ibex, was 1.08%
- Italy's FTSE MIB, +1.10% % (delayed 10 minutes)
Shares in the Asian Pacific markets were mostly lower:
- Japan's Nikkei 225, +0.21%
- China's Shanghai Composite Index, -0.49%
- Hong Kong's Hang Seng index, -2.18%
- Australia S&P/ASX index, -0.33%
Looking at the US debt market, yields are little changed:
- 2-year yield 4.897%, -6.4 basis points. At this time yesterday (before the CPI)., the yield was at 4.975%
- 5-year yield 4.558%, -6.5 basis points at this time yesterday, the yield was at 4.620%
- 10-year yield 4.519%, -5.6 basis points. At this time yesterday, the yield was at 4.568%
- 30-year yield 4.626%, -3.6 basis points at this time yesterday, the yield was at 4.655%
Looking at the treasury yield curve spreads:
- The 2-10 year spread is at -37.7 basis points. At this time Friday, the spread was at -41.0 basis points
- The 2-30 year spread is at -27.1 basis points. At this time Friday, the spread was at 132.4 basis points
European benchmark 10 year yields are lower:
PS: Citigroup earnings have now been released and they beat expectations too:
- EPS: $1.58 (Expected: $1.23) - BEAT
- Revenue: $21.1 billion (Expected: $20.4 billion) - BEAT
