In the U.S.: Stock-Index Futures Decline on JPMorgan

13 January 2012

The first major earnings season casualty….analyst expresses dismay as to why investors expected the largest U.S. bank to “beat estimates given the operating environment of last year.

U.S. stock-index futures fell after JPMorgan (JPM) Chase & Co., the country’s biggest bank by assets, reported a decline in fourth-quarter profit.

JPMorgan slid 2.2 percent in early New York trading. Diamond Foods Inc. plunged 11 percent after a report that federal prosecutors in San Francisco have opened an investigation into its accounting.

Standard & Poor’s 500 Index futures expiring in March slid 0.1 percent to 1,290 at 7:36 a.m. in New York as investors awaited data on America’s trade deficit and consumer sentiment. Dow Jones Industrial Average futures retreated 9 points, less than 0.1 percent, to 12,404.

The S&P 500 rose for a fourth day yesterday as a drop in borrowing costs at debt auctions in Europe outweighed disappointing American jobless claims and retail-sales data. The gauge has gained 1.4 percent this week, climbing to the highest since July 28.

“Companies’ outlooks will be very important for investors during the earnings season,” said Walter Harecker, a Vienna- based fund manager at Semper Constantia Privatbank AG, which oversees about $10 billion. “We should be cautious for the coming weeks.”

Italy sold 4.75 billion euros ($6.1 billion) of bonds today, its maximum target, as borrowing costs fell. The Treasury auctioned 3 billion euros of benchmark securities due in November 2014 to yield 4.83 percent, down from 5.62 percent at the previous sale on Dec. 29.

JPMorgan Earnings

JPMorgan slid 2.2 percent to $36.05 in early New York trading. Fourth-quarter net income fell to $3.73 billion, or 90 cents a share, from $4.83 billion, or $1.12, in the same period a year earlier, the New York-based company said today in a statement. Earnings matched the average estimate of 90 cents by 28 analysts surveyed by Bloomberg.

Analysts had lowered their estimates after Chief Executive Officer Jamie Dimon, 55, said at a Dec. 7 investor conference that trading would be “essentially flat” from the third quarter.

“I don’t quite see how investors could be disappointed that JPMorgan didn’t beat estimates given the operating environment of last year,” said Michael Gayed, chief investment strategist at Pension Partners LLC in New York. “The trend in strength likely is not over, however, and broader market reaction to earnings is not sufficiently negative to warrant concern.”

Consumer Confidence

Data today is expected to show U.S. consumer confidence is at a seven-month high, based on a Bloomberg survey of economists. The Thomson Reuters-University of Michigan preliminary index of consumer sentiment in January increased to 71.5 from 69.9 at the end of December, according to the median forecast in the Bloomberg poll.

The trade deficit in the U.S. probably widened in November for the first time in five months as oil imports rose, economists said before another report. The shortfall grew to $45 billion from $43.5 billion in October, the smallest of the year, according to the median of 75 estimates in a Bloomberg News survey.

Diamond Foods plummeted 11 percent to $29.47 in premarket trading. Federal prosecutors are coordinating with the Securities & Exchange Commission to investigate how the snack maker paid its walnut growers, the Wall Street Journal reported on its website, citing unidentified sources. Lucy Neugart, a spokeswoman for Diamond Foods (DMND), declined to comment.


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