The market the day before
On January 13, the main American stock indexes finished trading in the red zone. The S&P 500 fell 1.42% to 4,659 points, the Dow Jones declined 0.49%, and the Nasdaq lost 2.51%. Only issuers from the utilities sector (+0.45%), non-cyclical consumer goods (+0.22%) and industry (+0.18%) closed in the black. The outsiders were IT companies (-2.65%) and manufacturers of cyclical consumer goods (-2.08%).
- KB Home Construction Company (KBH: +16.5%) reported better than expected for the fourth quarter, helped by continued high demand for housing.
- The quarterly results of Taiwan Semiconductor Manufacturing (TSM: +5.3%) were better than analysts' forecasts due to the growing demand for semiconductors. The chip manufacturer also plans to modernize and expand production facilities around the world.
- Virgin Galactic (SPCE: -18.9%) has announced plans to raise up to $500 million through convertible bonds.
The producer price index increased by 0.2% mom in December, falling short of the consensus forecast (+0.4% mom) and the November value revised down (+0.7%). The increase in annual terms (+9.7%) was the largest since 2010, while almost coinciding with analysts' expectations. The increase in the cost of services in various areas, including retail trade in fuel and lubricants, air transportation and retail trade in food, contributed to the growth of the indicator. At the same time, prices for goods decreased for the first time since April 2020 by 0.4% mom against the background of a correction in the cost of gasoline. The increase in the producer price index excluding food and energy was 8.3%. It is expected that the price increase will have a negative impact on the marginality of companies. As a result, investors will pay special attention to this financial metric in the coming weeks of the reporting season.
According to published data on the labor market, 230 thousand initial applications for unemployment benefits were submitted over the past week, which turned out to be higher than the consensus of analysts and indicators over the past two months. Nevertheless, the number of repeated applications for unemployment continues to decline, ahead of market forecasts.
The reporting season for banks starts today. JPMorgan, Citi and Wells Fargo will be the first to publish the results. In the preliminary reports on the income of these credit institutions, the main topic was the expectations associated with a short-term change in the volume of lending, an improvement in net interest income, and the still high quality of loans/assets, normalization of income from trading operations and mortgage lending, high return on capital and continued growth of expenses.
- Asian stock exchanges ended trading on January 14 in the red zone. China's CSI 300 fell by 0.82%, Japan's Nikkei 225 declined by 1.28%, Hong Kong's Hang Seng adjusted by 0.19%. EuroStoxx 50 has been losing more than 0.70% since the opening of the session.
- Risk appetite is uncertain. The yield of treasuries is at the level of 1.71%. Brent crude futures are quoted at $84.47 per barrel. Gold is trading at $1,821 per troy ounce.
In our opinion, the S&P 500 will hold the upcoming session in the range of 4630-4690 points.
Data on retail sales in December will be published today (consensus: unchanged after +0.3% a month earlier).
Today, the largest American bank JPMorgan Chase & Co. (JPM) will release a report for the fourth quarter. According to the forecast of FactSet, the revenue of the credit institution will reach $29.82 billion (-1% YoY). Earnings per share (EPS) may be $3.00, which is lower than last year's result ($3.79). At the same time, according to the results of the full fiscal year 2021, EPS may increase by 69% YoY, to $15.03, with a slight increase in revenue to $123.11 billion after $122.98 billion last year. In 2021, the increase in the bank's net profit was mainly due to the release of reserves to cover possible loan losses, which, however, is not a permanent source of income, but may contribute to positive profit dynamics in the medium term. The drivers of JPM's growth can also be attributed to the increase in commissions for investment banking services against the background of high activity in the M&A sector. JPMorgan has maintained its position as the second largest provider of mergers and acquisitions consulting services after Goldman Sachs.
The day before, the index of the Russian market corrected and broke through the support level in the area of the 50-day moving average. Nevertheless, the S&P 500 continues to move within the ascending long-term corridor. The RSI indicator dropped slightly below 50 points, closer to the oversold zone. The MACD signals a possible continuation of the downward trend.