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Todays Open Interest Change
Earnings season is getting underway as the biggest U.S. banks parade down Wall Street. While many things have been expected, like the rise in net interest income and a slowdown in dealmaking, investors are sending some of the biggest names in the business in opposite directions. Things were starkly seen on Tuesday as Goldman Sachs (GS) finished the session down 6.4%, whiles shares of Morgan Stanley (MS) ended the day with a gain of 5.9%.
What happened? Shareholders want to make sure that banks are focusing on other types of revenue sources, with a recession (or worries about one) threatening to derail investment banking profits. Goldman Sachs has not been so successful in diversifying into consumer banking and ended up posting its worst earnings miss in a decade. Loan loss provisions also came in higher than expected, while its Platform Solutions unit - which includes its consumer-focused GreenSky, credit card, and Marcus units - incurred $1.8B in expenses for all of 2022. See the full stats here.
On the other side of the Street, Morgan Stanley was quick to show off the performance of its wealth management division, with margins approaching 30% and $6.6B in pretax profits for 2022. That led the bank's earnings to meet expectations, while its revenue total came in higher than the consensus. "The firm did what it was supposed to do with our more stable Wealth and Investment Management businesses offsetting declines in Institutional Securities," declared CEO James Gorman. "This is hard evidence of the transformation we've made to become increasingly durable." Missed the earnings call? Check out the full transcript.
Elsewhere: Q4 reports last week from commercial banking giants also saw their stocks waver as they set aside billions of dollars in loan-loss provisions. Shares soon recovered after JPMorgan (JPM) CEO Jamie Dimon projected a "mild recession," compared to his "economic hurricane" warning from last summer, while Bank of America (BAC) and Citigroup (C) echoed his views. The banks will still have to boost their other revenue sources outside of net interest income amid risks that the "Fed funds could deviate from forwards, balance attrition and migration assumptions could be meaningfully different," or depositors find better places to put their money.
More pink slips might be on the way, with reports that Microsoft (MSFT) is laying off as much as 5% of its workforce, or nearly 11,000 employees. The cuts would take place in the company's engineering and human resources units, and follow similar layoffs at Salesforce (CRM), Amazon (AMZN) and Meta Platforms (META). Microsoft most recently shrank its workforce in October, including 1,000 employees across several areas of its business - like its Xbox division - as fears grow over slowing demand and the global economic outlook. (47 comments)
The Nikkei 225 Index (NKY:IND) soared 2% and the yen tumbled 2% overnight following a surprise announcement from the Bank of Japan. Key interest rates will remain in negative territory, a level where they have been since 2016, and the yield curve tolerance band that shocked markets in December was left unchanged. While the BOJ is the last major global central bank to maintain an ultra-loose monetary policy, many are questioning how long that could last in the wake of inflationary pressures. SA contributor Hunting Alpha still calls the iShares MSCI Japan ETF (EWJ) the sumo wrestler of ETFs in a recent technical analysis. (3 comments)
Jury selection has wrapped in a trial over Elon Musk's tweets claiming he had "funding secured" to take Tesla (TSLA) private in 2018. A group of nine jurors are now set to hear opening arguments today in a courtroom showdown that is scheduled to last for around 10 days. Millions - or possibly billions - of dollars in damages are on the line if Musk is found to have knowingly and materially misled shareholders. Despite the additional hot water, Tesla was the biggest gainer in the S&P 500 Index (SP500) on Tuesday with a 7.4% push higher. See why here (and it wasn't because of testimony that Tesla's self-driving footage was faked). (15 comments)
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In Asia, Japan +2.5%. Hong Kong +0.5%. China flat. India +0.6%.
In Europe, at midday, London +0.1%. Paris +0.2%. Frankfurt flat.
Futures at 6:30, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +2.4% to $82.08. Gold +0.4% to $1917.20. Bitcoin +0.2% to $21,208.
Ten-year Treasury Yield -5 bps to 3.48%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
9:00 Fed's Bostic Speech
9:15 Industrial Production
9:30 Fed's Bullard Speech
10:00 Business Inventories
10:00 NAHB Housing Market Index
1:00 PM Results of $12B, 20-Year Bond Auction
2:00 PM Fed's Beige Book
4:00 PM Treasury International Capital
Companies reporting earnings today »
What else is happening...
Fed details climate risk analysis plan for biggest U.S. banks.
Wyoming legislators propose a ban on electric vehicles.
Carvana (CVNA) plays defense with new rights plan.
U.K. inflation dips for second straight month, in line with consensus.
Apple (AAPL) eyes cheaper mixed-reality headset, postpones AR glasses.
United Airlines (UAL) gains on bottom line beat, bullish forecast.
Disney (DIS) slams activist Peltz amid proxy fight, defends Iger record.
Avatar sequel (DIS) passes The Lion King at domestic box office.
Albertsons (ACI) can pay dividend after Washington State drama.
Bitcoin (BTC-USD) recovers all losses since the collapse of FTX.