Hong Kong, October 08 2017: JPMorgan Chase & Co. building in Central, Hong Kong . JPMorgan is a Swiss global financial services company, One of big financial company in the world

Of interest

Banks bludgeoned as JPMorgan says it won’t make as much money as Wall Street hopes next year

Analysts’ estimate for net interest income is “not very reasonable,” says JPMorgan’s president

Luke Kawa

9/10/24 1:00PM

The biggest US bank is having its largest one-day drop since June 2020.

Shares of JPMorgan are off about 6.7% as of 12:40 ET after bank President Daniel Pinto warned that Wall Street’s forecasts for the year ahead are too rosy. That’s a worse showing than the bank’s 6.5% decline after reporting earnings in April.

At an industry conference on Tuesday, Pinto said current expectations for 2025 net interest income (the difference between what a bank earns on its loan book and other asset holdings and what it pays out to depositors) are “not very reasonable” and “will be lower” than the $89.5 billion consensus estimate.

A bad day for US financials was not on Tuesday’s bingo card after reports that a planned increase in bank capital requirements is getting watered down.

But the group is at the center of the down day in the stock market, with the Invesco KBW Bank ETF off 3.6% as of 12:40pm ET.

Analysts have been expecting a substantial convergence in earnings growth between the upper echelon of megacap tech and the rest of Corporate America in the quarters to come.

This update from JPMorgan casts doubt on the potential for a broad-based cyclical recovery in earnings. And a closer look at those sturdy profit estimates reveals just how reliant they are on an AI boom that may have reached its best-before date.

“Overall, fiscal year estimates are holding up better than historical trends would imply,” write Terence Malone and Rob Bate, members of the equity product management group at Barclays. “The resiliency of fiscal year 2024 estimates is still solely attributable to Big Tech; without these six stocks, negative revisions to S&P 500 earnings per share would have been worse than usual at this point in the year.”

Max Knoblauch9h

Nike’s China business declines for seventh straight quarter

Sportswear kingpin Nike reported results for its third quarter, which ended in February, after the bell Tuesday. The stock fell about 3% in after-hours trading.

For fiscal Q3, Nike reported:

Earnings of $0.35 per share, comfortably above the Wall Street consensus of $0.29 per share compiled by FactSet.
$11.28 billion in total revenue, roughly in line with the $11.26 billion estimate.

Nike’s sales in China — where the company earns about 15% of its revenue — fell 7% to $1.62 billion. That’s its seventh straight quarter of sales declines in the market, though this quarter’s was less than feared. The company had issued weak guidance for this quarter considering continued softness in the region.

“This quarter we took meaningful actions to improve the health and quality of our business,” said Nike CEO Elliott Hill. “The pace of progress is different across the portfolio and the areas we prioritized first continue to drive momentum.”

Nike shares are trading near decade lows this month, as tariffs continue to weigh on profits and shipping costs rise amid the war with Iran. As of Tuesday’s close, the stock was down 17% year to date.

Luke Kawa, Tasha Matsumoto

10h

Stocks end worst quarter since 2022 with best day since May

Optimism that the end of the war may be near sent stocks surging.

Max Knoblauch11h

Oil-sensitive travel stocks pop following Iran state media reporting on potential war resolution

Travel stocks are surging on Tuesday as oil prices fall following reports from Iranian state media that President Masoud Pezeshkian said the country has “the necessary will to end this war,” but would only do so with guarantees that “prevent the recurrence of aggression.”

The war has sent oil prices and refining margins surging this month, causing airlines and cruise lines to cut profit forecasts despite reported high demand.

Following Tuesday’s update, shares of the big four US airlines (Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines) all climbed, along with smaller rivals including JetBlue. US airlines have stopped fuel hedging in recent years, increasing their exposure to upward swings in oil prices.

Cruise stocks also rallied, with Carnival and Norwegian up more than 6% and Royal Caribbean up about 5%.

J. Edward Moreno14h

The FDA is expected to lift restrictions on certain peptides, the NYT reports

The Food and Drug Administration is expected to lift restrictions on certain peptides, allowing the experimental, often injectable substances to be sold by compounding pharmacies, The New York Times reported Tuesday.

The potential move was previously reported by The Wall Street Journal, and teased by Health Secretary Robert F. Kennedy Jr. on the “Joe Rogan Experience” podcast in late February.

Peptides have boomed in popularity recently, with search interest for “peptides” surpassing “ozempic” this month. Many of them are currently understudied and not approved for human use, a rule consumers are able to bypass by purchasing them from suppliers that sell them for, ostensibly, research purposes only.

As reports of the FDA changing its stance of peptides mount, consumer health companies like Hims & Hers and Superpower have been getting ready to roll out their peptide offerings as soon as they get the FDA's blessing.

The peptide gold rush: How impending deregulation could supercharge a shadow industry

Matt Phillips15h

Memory stocks bounce as Bernstein analyst calls TurboQuant fears “overdone”

Memory stocks rose Tuesday, after Bernstein analysts called the recent panic over Google’s TurboQuant AI algorithm “overdone.”

Bernstein analyst Mark Newman wrote:

“[Hard disk drive] and Memory stocks have sold off significantly due in part to fears from Google’s TurboQuant report. This however, should have zero impact on HDD demand and negligible impact on NAND demand. Given the stock sell-off we see this as an attractive entry point for Seagate Technology Holdings, Western Digital and Sandisk’s and upgrade WDC to Outperform.”

All three stocks were up early Tuesday, as was memory chip maker Micron.

Today’s rally stands in stark contrast to the pummeling these shares have endured over the last week, after Google Research published a technical paper on March 24 detailing its TurboQuant AI algorithm, which compresses the amount of data associated with AI operations without affecting the accuracy of AI models.

That was seen as a threat to surging AI demand for memory storage, which has supercharged prices for memory chips and memory-related stocks over the last year.