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Business

JPMorgan Chase, Wendy’s and more

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A sign is posted in front of a Wendy’s restaurant on August 10, 2022 in Petaluma, California.

Justin Sullivan | Getty Images

Check out the companies making headlines in midday trading.

JPMorgan – Shares of the biggest U.S. bank by assets rose more than 2% after the firm posted fourth-quarter profit and revenue that topped expectations. The New York-based bank said profit jumped 6% from the year earlier period to $11.01 billion, or $3.57 per share. Interest income at the bank surged 48% on higher rates and loan growth.

Citigroup — Citigroup’s stock added more than 1% as the company reported a record fourth quarter for fixed income. The bank said net income decreased during the period by more than 21% over last year as it set aside more money for potential credit losses.

Delta Air Lines — The airline stock edged about 4% lower after the company said in its outlook that higher labor costs would hurt its first-quarter profits. Delta topped analysts’ expectations on the top and bottom lines for the fourth quarter.

Wendy’s — The fast-food chain’s stock added 5.7% after Wendy’s shared positive preliminary fourth-quarter results and announced a handful of reshuffles within its corporate structure. A regulatory filing also indicated that Nelson Peltz does not want to take over Wendy’s.

Wells Fargo – The bank stock dipped 0.1% after the firm reported shrinking profits, weighed down by a recent settlement and the need to build up reserves amid a deteriorating economy. Wells Fargo’s net income tumbled 50% to $2.86 billion from $5.75 billion a year ago. The bank set aside $957 million for credit losses after reducing its provisions by $452 million a year ago.

Bank of America —The financial stock rose less than 1% on Friday after Bank of America beat estimates on the top and bottom lines for the fourth quarter. A sharp rise in net interest income helped the results, though management cautioned that the metric could decline sequentially in the first quarter. CEO Brian Moynihan also said that a mild recession was the firm’s baseline assumption for 2023.

Virgin Galactic Holdings — The space tourism company jumped nearly 13% after it said it was on track for a commercial launch in the second quarter of 2023. The company also announced its president of aerospace systems, Swami Iyer, was leaving.

Tesla — Shares of the electric-vehicle maker shed more than 2% after being downgraded to sell from neutral by Guggenheim and cutting prices on its vehicles in the U.S. and Europe. In its downgrade, Guggenheim cited concerns with Tesla’s fourth-quarter estimates.

Bank of New York Mellon — Shares of the mid-sized bank rose 2.5% on Friday after the company reported net income of $509 million for the fourth quarter. That was down 38% year over year but up about 60% from the third quarter. That profit rose to $1.1 billion, or $1.30 per share, when excluding certain items, but it is unclear if those results were comparable to analysts’ estimates.

UnitedHealth — The health-care stock advanced more than 1% after the company surpassed Wall Street’s fourth-quarter expectations. UnitedHealth reported adjusted earnings of $5.34 a share on $82.8 billion in revenue. Analysts polled by Refinitiv expected earnings of $5.17 per share on revenues of $82.59 billion.

Lockheed Martin — The defense stock slipped more than 3% after Goldman Sachs downgraded shares to sell from a neutral rating. The firm said shares could fall if the government trims defense spending. Northrop Grumman shares also dove 5% on Goldman’s downgrade to a sell from neutral rating.

Salesforce — The software stock shed 1% following a downgrade to neutral from overweight by Atlantic Equities. The firm said the stock would likely be hurt by executive departures and slowed growth.

Logitech — Shares of the consumer electronics company dipped 3.3% after Deutsche Bank downgraded the shares to a hold from a buy rating. The decline built on Thursday’s losses after reporting preliminary results that signaled slowing sales and earnings.

Warner Music Group – Shares of Warner Music Group shed 5.5% after Guggenheim cut its rating on the stock to neutral from buy and trimmed its price target to $35 from $38, citing worries about revenue from the music streaming service.

Copa — Shares of the Latin American airline jumped 4.9% following an upgrade to overweight from a neutral rating by analysts at JPMorgan. The bank said shares could rally 50% as air travels resurges.

AutoNation — AutoNation’s stock fell 4.3% as Wells Fargo downgraded the automotive retailer to equal weight from an overweight rating, saying that its valuation looks “reasonable” and estimates look too high.

— CNBC’s Jesse Pound, Yun Li, Michelle Fox, Alex Harring and Carmen Reinicke contributed reporting

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Business

Wells Fargo settlement includes $2 billion for customers. What to know

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People owed a piece of the $2 billion that Wells Fargo has agreed to pay to customers affected by some of its banking practices could soon receive those funds.

The nation’s fourth-largest bank reached a settlement with the Consumer Financial Protection Bureau, announced Tuesday, to resolve customer abuses related to auto lending, deposit accounts and mortgage lending, affecting about 16 million accounts.

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Wells Fargo also agreed to pay a $1.7 billion civil penalty — the largest ever doled out by the CFPB.

“We have already communicated with many of the customers who may have been impacted by the matters covered in the settlement, and those efforts are ongoing,” a Wells Fargo spokesperson told CNBC.

In other words, if you are among the affected customers, you may already have received your share of the $2 billion, or you will automatically hear from Wells Fargo. You do not need to take any action, the bank said.

The CFPB said that customers of the bank were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed and had payments to auto and mortgage loans misapplied. Additionally, Wells Fargo charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts, and improperly froze some accounts, the CFPB said.

$1.3 billion has already reached 11 million accounts

More than 11 million customer accounts already have received more than $1.3 billion related to auto loan issues. Another 5 million customers with deposit accounts are receiving $500 million in remediation, including $205 million related to surprise overdraft fees, and thousands of customers with mortgages will receive a piece of at least $195 million, a CFPB spokesperson said.

The amount that each harmed consumer will get (or already got) depends on the specifics. For customers whose vehicles were wrongly repossessed, the remediation includes $4,000, but could be higher. For deposit accounts that were wrongly frozen, the settlement calls for $150 for each affected customer.

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“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” said Charlie Scharf, Wells Fargo CEO, in the company’s press release about the settlement.

“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Scharf said.

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Wells Fargo agrees to $3.7 billion settlement with CFPB over consumer abuses

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Charles Scharf, chief executive officer of Wells Fargo & Co., listens during a House Financial Services Committee hearing in Washington, D.C., U.S., on Tuesday, March 10, 2020.

Andrew Harrer | Bloomberg | Getty Images

Wells Fargo agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau over customer abuses tied to bank accounts, mortgages and auto loans, the regulator said Tuesday.

The bank was ordered to pay a $1.7 billion civil penalty and “more than $2 billion in redress to consumers,” the CFPB said in a statement. In a separate statement, the San Francisco-based company said that many of the “required actions” tied to the settlement were already done.

“The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes,” the agency said in its release. “Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”

The resolution lifts one overhang for the bank, which has been led by CEO Charlie Scharf since October 2019. In October, the bank set aside $2 billion for legal, regulatory and customer remediation matters, igniting speculation that a settlement was nearing. But other regulatory hurdles remain: Wells Fargo is still operating under consent orders tied to its 2016 fake accounts scandal, including one from the Fed that caps its asset growth.

CFPB Director Rohit Chopra said Wells Fargo’s “rinse-repeat cycle of violating the law” hurt millions of American families and that the settlement was an “important initial step for accountability” for the bank.

Shares of the bank fell 2.5% in premarket trading.

This story is developing. Please check back for updates.

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Business

Home prices are finally falling. But how low will they go?

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The US housing market is in the midst of a major shift. After two years of stratospheric price appreciation, home prices have peaked and are on their way back down.

But what homebuyers and homeowners alike want to know is: How much lower will prices go?

The short answer: Prices are likely to drop further, but not by as much as they did during the housing bust. From the 2006 peak to the 2012 trough, national home prices fell by 27%, according to S&P CoreLogic Case-Shiller Indices, which measures US home prices.

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers,” said Jeff Tucker, senior economist at Zillow. “Because of foreclosures and short sales there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

Plus, that housing crash came at a time when the inventory of homes for sale was four times higher than it is now. Current inventory is still substantially lower than pre-pandemic levels, which has increased competition for homes. And that is keeping prices relatively strong.

“I would be surprised to see prices anywhere drop below where they were in 2019,” said Tucker. “There was some overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support. Now they are coming down.”

With mortgage rates more than doubling since the start of this year, the calculations for a homebuyer have changed considerably. The monthly principal and interest mortgage payment on the median priced home is up $930 from a year ago, a 73% increase, according to Black Knight, a mortgage data company.

When you factor in soaring mortgage rates, along with elevated home prices and wages that aren’t increasing as fast, buying a home is less affordable now than it has been in decades, according to Black Knight.

But there may be some relief in sight for buyers.

Economists at Goldman Sachs expect home prices to decline by around 5% to 10% from the peak hit in June.

Wells Fargo has recently forecasted that national median single-family home prices will drop by 5.5% year-over-year by the end of 2023.

Wells Fargo’s economists estimate that the median price for an existing single family home to be $385,000 this year, up 7.8% from last year, but the growth will be a lot less than the 19% year-over-year increase seen in 2021.

The economists anticipate the median home price will fall to $364,000, a decline of 5.5% from this year. They predict prices will rebound and rise again in 2024, with the median price ticking up 3.3% to 376,000 by the end of 2024.

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates,” the Wells Fargo researchers wrote. “If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth. A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

Ultimately, how much prices fall will depend on where you live.

Unlike the run-up in prices during the pandemic that caused home values in markets across the country to surge, the cooling off will be more regional, said Tucker. The drops will be more deeply felt in places where there were larger gains during the pandemic, many of them in the West and Sunbelt, including cities like Austin, Phoenix and Boise, he said.

“Nationally, we might see a 5% decline from the peak,” Tucker said. “But prices will decline by more in the West and there will be a smaller decline in the Southeast.”

In September, month-over-month home prices dropped in several pandemic hotspots, including Phoenix, down 2.3%; Las Vegas, down 1.9% and Austin, down nearly 1%, according to Zillow.

And Boise, Idaho, where prices surged nearly 60% during the pandemic, is already seeing annual declines, with prices falling 3.9% year over year in September, according to Zillow.

“A number of metro areas, especially in the West, will see some year-over-year price declines this spring,” said Tucker. “That will be the worst comparison time because that’s when many markets reached their peak.”

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Business

Stock futures rise slightly after a rollercoaster week

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Traders on the floor of the NYSE, Aug. 4, 2022.

Source: NYSE

Stock futures edged higher in overnight trading Sunday as investors awaited big earnings reports to roll in.

Futures on the Dow Jones Industrial Average gained about 50 points. S&P 500 futures and Nasdaq 100 futures both inched 0.3% higher.

The S&P 500 just came off its fourth negative week in five with a 1.6% loss last week. A hotter-than-expected inflation reading stoked wild price swings in the markets as investors readjusted their expectations for the Federal Reserve’s coming rate hikes.

“As inflation remains elevated for longer and the Fed hikes further, the risk increases that the cumulative effect of policy tightening pushes the U.S. economy into recession, undermining the outlook for corporate earnings,” Mark Haefele, CIO at UBS Global Wealth Management, said in a note.

Meanwhile, the third-quarter earnings season has kicked off. Investors are monitoring if corporate America will have any significant downward revisions to their outlooks in the face of stubbornly high inflation and the economic slowdown.

Bank of America is slated to report Monday before the bell, while Goldman Sachs will release numbers Tuesday morning. JPMorgan and Wells Fargo reported solid results last week, while Morgan Stanley’s equity trading revenue disappointed.

Many notable technology names are also reporting this week, including Netflix, Tesla and IBM. Johnson & Johnson, United Airlines, AT&T, Verizon and Procter & Gamble are other big companies on investors’ radar.

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Business

Jim Cramer recaps 4 major banks’ earnings reports

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CNBC’s Jim Cramer on Friday offered investors his thoughts on the major banks that reported earnings this week.

“If the whole market hadn’t already roared yesterday, I think we could’ve had a nice rally in response to these numbers. But, as it is, I’d say this is a surprisingly solid start to earnings season,” he said.

JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup reported their latest quarterly results on Friday. Here is Cramer’s take on each of the banks’ latest quarters:

JPMorgan Chase

JPMorgan Chase beat Wall Street expectations for its top and bottom line, aided by the Federal Reserve’s interest rate hikes. Cramer said he was surprised that the bank had a solid quarter since CEO Jamie Dimon warned that the U.S. economy would likely enter a recession in the middle of next year. 

However, Cramer said he still expected the bank to see a boost from rising rates.

“The banks make a fortune when the Federal Reserve raises interest rates, because they can take your deposits, which they pay next to nothing for, and then invest them in short-term Treasurys to get a much higher risk-free return,” he explained.

Wells Fargo

The bank beat on earnings and revenue in its latest quarter but saw a cut to its bottom line from its decision to boost its loan loss reserves. 

Cramer said he likes the stock because the company has more interest rate exposure than most of its peers, which makes it attractive during a high-interest rate environment. And while a risk of higher rates is that people could lose their jobs and have to default on their obligations, which would result in a higher percentage of bad loans, Wells Fargo’s strength in its net interest income is more than enough to offset the damage from bad loans, according to Cramer.

“I remain a believer here — management’s executing incredibly well — I think the story only gets better as rates go higher,” he said. “Buy Wells Fargo.”

Morgan Stanley

Cramer said that he believes the market overreacted to Morgan Stanley’s third-quarter earnings and revenue miss. Shares of the bank fell 5%.

While he acknowledged that the quarter was rough, Cramer maintained that he believes the stock is a buy, highlighting the company’s generous dividend and stock buyback.

“I think Morgan Stanley can eventually thrive once the markets even out, but until then, you’ve got to be patient in this one,” he said.

Citigroup

Cramer said that he’d rather own the other banks than Citi, which beat on revenue and earnings in its latest quarter but saw a 25% decline in profits. Shares of the company rose 0.65%.

“We’ve seen Citi rally in response to earnings a number of times. … And then you know what happened? The gains quickly faded, and the stock came right back down,” he said.

Disclaimer: Cramer’s Charitable Trust owns shares of Morgan Stanley and Wells Fargo.

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Business

Dow futures fall 170 points to start week with key inflation data, earnings ahead

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Traders on the floor of the New York Stock Exchange.

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Stock futures are lower Sunday night as the markets come out of a tumultuous week and traders look ahead to key reports coming in the next week that can offer insights into the health of the economy.

Futures connected to the Dow Jones Industrial Average slid 0.6% to 29,175 points. S&P 500 futures dropped 0.7% to 3,626.25 points, while Nasdaq 100 futures slipped 0.8% to 11,014.25 points.

Market observers generally consider the week ahead as the kickoff to earnings season, with four of the world’s largest banks – JPMorgan, Wells Fargo, Morgan Stanley and Citi – reporting Friday. PepsiCo, Delta and Domino’s are also among companies reporting next week.

Inflation will also take center stage as new monthly Consumer Price Index data comes Thursday morning.

It will follow a week of whiplash for market participants. The first half brought a relief rally that pushed the S&P 500 up more than 5% in its largest two-day gain since 2020.

But jobs data that economists say will keep the Federal Reserve on a path to continue raising interest rates and OPEC+’s decision to slash oil supply rattled investors, diluting wins later in the week. When day trading ended Friday, the S&P was up 1.5% compared to where it started the week. The Dow and Nasdaq were up 1.5% and 0.7%, respectively.

Still, the Dow, S&P 500 and Nasdaq had the first positive week in the last four. All remain down substantially so far in 2022, however, and the Nasdaq is less than 1% away from its 52-week low.

Meanwhile, the 2-year Treasury yield rose 6 basis points, closing at 4.316%. One basis point is equivalent to 0.01%.

“The direction of the stock market is likely to be lower because either the economy and corporate profits are going to slow meaningfully or the Fed is going to have to raise rates even higher and keep them higher for longer,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, on Friday.

“Given the conditions that we are operating under, we believe it’s prudent to begin preparing for a recession,” he added. “The talk of a shallow recession that is now the narrative-du-jour strikes us as eerily similar to the ‘inflation is transitory’ narrative of last year.”

Last week brought heightened concerns that corporate earnings will show the ugly side of a surging dollar as Levi Strauss became the latest to cut guidance due to sliding international sales.

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Business

Don’t ‘be a hero’ while the Fed battles inflation

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CNBC’s Jim Cramer on Friday warned investors against adding to their portfolios until the stock market and economy become less volatile.

“This economy is a runaway train; it’s smashed through the Fed’s blockades today, so now they may just blow up the tracks to derail the whole darn thing. When they detonate, it’ll be safe to buy. Until then, I am urging you not to be a hero,” he said.

Cramer warned that he expects central bank officials to stick to their hawkish stance on inflation, adding that the producer price index and consumer price index due next week could shed more light on the state of inflation and the Fed’s next moves.

Stocks tumbled on Friday after the September jobs report signaled that the job market is strengthening despite the central bank’s aggressive interest rate increases.

“There’s always the possibility that this is the last red-hot employment number, in which case the Fed’s tightening into an abyss and the damage could be catastrophic,” he said.

Cramer also previewed next week’s slate of earnings. All earnings and revenue estimates are courtesy of FactSet.

Wednesday: PepsiCo

  • Q3 2022 earnings release at 6 a.m. ET; conference call at 8:15 a.m. ET
  • Projected EPS: $1.84
  • Projected revenue: $20.81 billion

Cramer said he’s hoping the company will report that its raw costs are coming down.

Thursday: Delta Airlines, Walgreens Boots Alliance, Domino’s Pizza, BlackRock

Delta Air Lines

  • Q3 2022 earnings release at 6:30 a.m. ET; conference call at 10 a.m. ET
  • Projected EPS: $1.55
  • Projected revenue: $12.90 billion

The company is likely concerned about rising oil prices, Cramer predicted.

Walgreens Boots Alliance

  • Q4 2022 earnings release at 7 a.m. ET; conference call at 8:30 a.m. ET
  • Projected EPS: 77 cents
  • Projected revenue: $32.09 billion

Domino’s Pizza

  • Q3 2022 earnings release at 7:30 a.m. ET; conference call at 10 a.m. ET
  • Projected EPS: $2.98
  • Projected revenue: $1.07 billion

He said that he believes both Walgreens and Domino’s are dealing with worker shortages.

BlackRock

  • Q3 2022 earnings release at 6:15 a.m. ET; conference call at 8:30 a.m ET
  • Projected EPS: $7.64
  • Projected revenue: $4.3 billion

Cramer said he’s betting the company will report great results and that he’d be a buyer of the stock.

Friday: JPMorgan Chase, Wells Fargo, Morgan Stanley, UnitedHealth Group

JPMorgan Chase 

  • Q3 2022 earnings release at 7 a.m. ET; conference call at 8:30 a.m. ET
  • Projected EPS: $2.92
  • Projected revenue: $32.13 billion

Wells Fargo 

  • Q3 2022 earnings release at 7 a.m. ET; conference call at 10 a.m. ET
  • Projected EPS: $1.10
  • Projected revenue: $18.76 billion

Morgan Stanley 

  • Q3 2022 earnings release at 7:30 a.m. ET; conference call at 9:30 a.m. ET
  • Projected EPS: $1.52
  • Projected revenue: $13.24 billion

“With employment still red-hot, it’s entirely possible the banks can make a killing here without much risk of bad loans,” Cramer said.

UnitedHealth Group

  • Q3 2022 earnings release at 5:55 a.m. ET; conference call at 8:45 a.m. ET
  • Projected EPS: $5.43
  • Projected revenue: $80.52 billion

While he has faith the quarter will be solid, he expects the stock to decline if the company’s results are short of being perfect.

Disclaimer: Cramer’s Charitable Trust owns shares of Morgan Stanley and Wells Fargo.

Jim Cramer’s Guide to Investing

Click here to download Jim Cramer’s Guide to Investing at no cost to help you build long-term wealth and invest smarter.

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Business

FedEx, Costco, Boeing and more

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Check out the companies making headlines before the bell:

FedEx (FDX) – FedEx remains on watch this morning after announcing a 6.9% increase in shipping rates and plans to cut another $4 billion in annual costs. FedEx fell 3.2% in the premarket.

Costco (COST) – Costco lost 3.3% in the premarket despite reporting better-than-expected profit and sales for its latest quarter. The company reported operating margins that were slightly below consensus. Costco said it has no immediate plans to raise membership prices, but said it would happen at some point.

Boeing (BA) – Boeing will pay $200 million to settle SEC charges that it made misleading claims about the safety risks of its 737 MAX jet after two of the planes were involved in fatal crashes. Former CEO Dennis Muilenburg will pay $1 million as part of the settlement, with both parties neither admitting nor denying wrongdoing. Boeing lost 1.8% in the premarket.

Raytheon Technologies (RTX) – Raytheon won a $985 million Pentagon contract to develop hypersonic attack cruise missile prototypes, beating out rivals Boeing and Lockheed Martin (LMT).

CalAmp (CAMP) – The “internet of things” software company’s stock rallied 3.5% in premarket action after it reported a smaller-than-expected quarterly loss with revenue that topped analyst forecasts. CalAmp saw record software and subscription services revenue during the quarter.

Ally Financial (ALLY) – The financial services company’s stock fell 2.7% in the premarket after Wells Fargo downgraded it to “equal weight” from “overweight”. Wells said Ally will feel pressure from Fed rate hikes and an accelerating decline in used vehicle prices, which impacts yields from leases.

Qualcomm (QCOM) – Qualcomm said its future automotive business pipeline increased to $30 billion in orders, up by more than $10 billion since July. The increase came primarily from orders for its Snapdragon Digital Chassis computer chip. Qualcomm, however, fell 2% in premarket action.

fuboTV (FUBO) – The sports-focused streaming service was upgraded to “outperform” from “neutral” at Wedbush, which sees the stock at a compelling entry point. Wedbush expressed confidence that fuboTV can successfully raise capital and cut its cash burn rate. The stock gained 2% in the premarket.

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Business

REITs which look resilient in recession, analysts say

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