Since the market was up yesterday it had to be down today. This has seemingly been the case these past few weeks as volatility continues to be the theme. Trading volume was actually pretty low today, but the Dow finished off 123 points to close the week at 24,360. Investors continue to be cautious amid the geopolitical noise, even though earnings have been better than expected.
Three of the four big banks reported earnings today. J.P. Morgan Chase, Citigroup, and Wells Fargo reported better than expected numbers, but saw there stock prices get whacked – spending most of the day down 2% to 3%. While Wells reported solid numbers investors are still worried about their myriad of issues amidst their most recent scandals, which could result in a cost of $1 billion to settle the U.S. probe of its consumer business, and they also didn’t like the possibility that Wells might have to restate their earnings report at a later date. Chase and Citi on the other hand, showed strong earnings and beat already lofty expectations including roughly 30% revenue gains in their equity trading, but the concern right now is in their fixed income and loan generation departments. The bond departments at the banks are much larger than the equity departments and traders missed their expectations. Another major concern is loan generation. While rising interest rates theoretically should provide more revenue for banks, it only provides more revenue if they actually sell loans, and both Chase and Citi showed declines in new loans which causes some investors wonder if borrowing will continue to decline as interest rates increase. While these sentiments are speculative, the facts are the earnings are good and fundamentals are solid.
Oil futures continue to climb with uncertainty in Syria and general tensions continuing to rise in the Middle East. Oil prices have been steadily increasing this year, gaining another quarter point today, and now is priced at little over $67 a barrel. Analysts believe that this should mean good things for energy stocks, which haven’t seen their stock prices increase in conjunction with the increase in oil prices. Could be interesting once the energy companies start to report earnings.
This afternoon I attended a Scout fundraiser lunch, sponsored by the Seahawks and hosted by former governor, Gary Locke, and former Microsoft exec, Scott Oki. We got some great laughs listening to their stories of Scout mysery and general “lunkheadedness”, but it was also very cool to listen to them speak about how the Scouts changed their lives and helped them build the skills that would ultimately help them to become successful. The moment of the day, however, came during the last question of the open Q&A with current Seahawks offensive linemen, George Fant and Rees Odhiambo. Referencing the well documented struggles of the Seahawks offensive line, a young Scout asked, “How does it make you feel to hear people call Russell Wilson a one-man band?”…..I think we were all thinking it, but leave it to a Scout to have the courage to ask.