said Monday that its second-quarter profit declined 32%.
The second-largest U.S. bank earned $6.2 billion, down from $9.2 billion a year earlier. Per-share earnings of 73 cents missed the 75 cents that analysts polled by FactSet had expected.
Revenue increased 6% from a year ago to $22.7 billion, slightly below analysts’ expectations.
Last week,
JPMorgan Chase
JPM 4.58%
& Co.,
Citigroup Inc.,
Wells Fargo & Co. and
Morgan Stanley
all reported double-digit drops in profit. Executives at the country’s largest banks said there is more uncertainty than usual about where the economy is headed.
Bank of America released $48 million in funds it had set aside to cover potential future losses. A year ago, the bank released $2.2 billion, lifting its profits at the time.
Some bank executives believe a recession is on the horizon, and that the Federal Reserve’s attempts to curb inflation with interest-rate increases could help spark the downturn. Investors are watching bank earnings closely because they are viewed as a bellwether for the broader economy.
The Federal Reserve has been raising interest rates this year, including two big increases in the second quarter. Higher rates allow banks to charge more on loans, which can juice profits. The resulting market gyrations have also helped banks’ trading desks, which benefit from volatility.
Bank of America’s net interest income, including its lending profits, rose 22% from a year earlier to $12.4 billion, thanks largely to higher rates and stronger demand for loans.
Noninterest income, which includes fees, fell 9% from a year earlier to $10.2 billion. Lower investment-banking fees and changes to the bank’s overdraft policy dragged down fee income, Bank of America said. The bank said in January it would cut overdraft fees from $35 to $10.
The U.S. could be headed toward a recession, according to economists and latest GDP figures. But this recession might be different from past ones because of one main indicator: unemployment. WSJ’s Jon Hilsenrath explains.
Investment banking fees fell 46% from a year earlier to $1.2 billion. Investment banking revenue fell 54% at JPMorgan, 55% at Morgan Stanley and 46% at Citigroup in the second quarter.
Adjusted trading revenue increased 11% to about $4 billion.
Outstanding loans and leases grew 12% from a year earlier to just over $1 trillion. Loans in the bank’s commercial division rose 16%, while loans to consumers increased 7%. That is positive news for a bank that, like its peers, struggled to profit from lending for much of the pandemic because of rock-bottom interest rates and tepid loan demand.
Bank of America’s total expenses increased 1.5% to $15.3 billion.
sent shares of the social-media company tumbling, as investors prepare for what is expected to be a messy courtroom battle.
Twitter shares fell 9.7% to $33.26 in midday trading. The move follows Mr. Musk’s disclosure to securities regulators Friday that he is seeking to abandon his $44 billion deal to buy Twitter and take it private, saying that the company hasn’t provided the information he needs to assess the prevalence of fake or spam accounts.
Twitter stock is trading about 38% below the $54.20-a-share price at which Mr. Musk agreed to buy the company in April, marking a stunning turnaround for what has been considered the buzziest deal of the year. Its shares also are trading below where they were in early April before Mr. Musk took a surprise 9% stake in the company, which officially kicked off his takeover attempt.
Mr. Musk’s bid to buy Twitter has spurred a wild ride in shares of both
Tesla Inc.
and the social-media company at a time when stocks around the globe have been falling. Mr. Musk is chief executive of the electric-car maker and sold Tesla stock this year after agreeing to buy Twitter.
News of the acquisition initially triggered a rush of activity in Twitter shares and options, with many individual investors piling in. Purchases of Twitter shares among individual investors swelled to about 11 times the monthly average since 2020 in April, when Mr. Musk initially made a bid for the company.
Since then, shares of both companies have fallen into a deeper slump. Tesla’s and Twitter’s shares have tumbled around 29% and 35%, respectively, since the deal was announced, compared with a roughly 10% drop for the S&P 500.
Fears about inflation and a potential recession on the horizon have dragged stocks sharply lower and especially punished shares of technology companies.
The technology-focused Nasdaq Composite is down 27% for the year, as investors have dumped shares of tech behemoths and nonprofitable growth companies alike. Twitter also faces a darkening outlook for digital advertising, and, just last week, laid off 30% of its recruitment team.
Mr. Musk’s drama with Twitter has injected even more volatility into shares of Tesla, a stock notorious for its wild swings. Some Tesla fans said they were concerned that Mr. Musk would lose focus from the electric-vehicle maker with the new initiative, which weighed on the company’s shares.
Tesla shares have remained the most popular bearish bet in the U.S. market for investors during the turbulence this year. The slide in the stock also has made it the most profitable short position, according to S3 Partners data as of July 1.
Tesla’s stock already got a boost last week and was among the biggest gainers in the S&P 500, as concerns about the deal falling through swirled. On Monday, Tesla shares fell 5.8% to $708.54.
Now, investors, lawyers and onlookers are bracing for what could be one of the most unusual legal battles in corporate takeover history—a drama reflected in Twitter’s gyrating stock. As of Friday, the social-media company had lost more than $11 billion in market value from its closing high of $51.70 in April.
So far, traders in the options market have been wagering that the deal will eventually fizzle.
“Right now, the options market is leaning more towards they won’t” do a deal, wrote Amy Wu Silverman, a managing director at RBC Capital Markets, in a note to clients.
Two sharply different dynamics have been playing out in the market for Tesla and Twitter options, according to Ms. Wu Silverman. A measure of expected volatility in Tesla has been dropping, while it has been rising for Twitter. Traders have been paying more to protect against further losses in Twitter stock through the options market, while the cost of such insurance has edged lower in Tesla options, according to Ms. Wu Silverman.
Even ahead of Mr. Musk’s regulatory filings late Friday, Tesla options tied to the shares jumping to $760 were among the most popular in the entire market, according to data provider Trade Alert. They were behind only bets tied to the broader S&P 500 and
Apple Inc.
stock.
In his bid to terminate the deal, Mr. Musk said Friday that Twitter had violated the agreement, arguing that it was making critical changes to the ordinary running of the business without his consent. He also accused the company of withholding data from him. Mr. Musk doubled down on his view in the early hours of Monday with a series of characteristic memes and replies to users on Twitter.
Twitter has said previously that it has and will continue sharing information with Mr. Musk. The company now says it will pursue legal action, arguing Mr. Musk is required to close the agreed-on deal.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com
Robinhood Markets struggled to handle huge volumes of stock trading and sparred with its principal customer, market maker Citadel Securities, during the week in January 2021 when meme stocks exploded, according to a report from the Democratic staff of the House Financial Services Committee.
The committee held hearings in February 2021, questioning the chief executives of Robinhood and Citadel Securities, as well as meme-stock hero Keith Gill and Gabe Plotkin, the hedge-fund manager who lost billions betting against GameStop and other hot stocks. The staff reviewed tens of thousands of pages of internal documents, including pointed communications inside and between the companies.
U.S. stocks rose Wednesday in choppy trading, clawing back some of their losses after selling off sharply a day earlier.
The S&P 500 gained 1.4% in afternoon trading, while the Dow Jones Industrial Average added 1.2%, or about 407 points. The technology-focused Nasdaq Composite advanced 1.4%. The gains were broad-based, with 10 of the S&P 500’s 11 sectors rising. Only the communications services group lost ground.
On Tuesday, the Nasdaq recorded its largest one-day percentage decline since September 2020, while the Dow dropped more than 800 points, as investors digested earnings reports and weighed concerns about inflation, the prospect of rapid policy tightening by the Federal Reserve and the spread of Covid-19 in China.
Major U.S. stock indexes are down substantially for the year, with the S&P 500 down 11% and the Nasdaq Composite down 19%. On Tuesday, the Nasdaq closed at its lowest level since December 2020, wiping out the gains it notched in 2021. The Russell 2000 index of small-cap companies closed Tuesday at its lowest level since December 2020.
Investors said they looked at Wednesday’s moves higher as a temporary relief rally.
“Stocks have been so weak so far this month I believe investors are seeing some value in the current pricing,” said
Tracie McMillion,
head of global asset allocation strategy at Wells Fargo Investment Institute.
Seema Shah,
chief strategist at Principal Global Investors, said she sees the next moves in the stock market as either sideways or down.
Earnings are “supporting the market to some extent, but I don’t think it’s enough to support it higher,” Ms. Shah said. She said her team has moved to a neutral recommendation on their overall equity positions.
“The risks are just piling up,” she said. “We don’t want to be picking up pennies in front of the steamroller.”
Many big companies are reporting earnings this week, with results due after Wednesday’s closing bell from companies including Facebook parent
Meta Platforms
and
Ford.
Twitter,
which this week agreed to sell itself for $44 billion to Elon Musk, is set to report Thursday.
Nearly 80% of S&P 500 companies that have reported earnings so far have surpassed analysts’ estimates,
FactSet
data show. Still,
Emily Roland,
co-chief investment strategist at John Hancock Investment Management, said investors remain focused on a number of wide-ranging issues weighing on markets.
“Markets are mostly focused on some of the macro concerns around aggressive tighter Fed policy, as well as this global growth scare that’s playing out,” she said.
Many of those concerns have driven the dollar to its highest level in more than two years. The dollar tends to strengthen when the global economy sours and when investors expect U.S. growth to outpace the rest of the world. Rising interest rates in the U.S. also typically benefit the greenback as higher rates attract yield-seeking investors to the currency.
The ICE U.S. Dollar Index, which tracks the currency against a basket of others, rose 0.9% to 103.23, on pace to finish at its highest level since January 2017 and surpass even the coronavirus-induced market downturn of March 2020. Including Wednesday, the index has risen for all but two of April’s 18 trading sessions.
In the bond market, the yield on the 10-year U.S. Treasury note rose to 2.786% on Wednesday from 2.773% on Tuesday. Recently, investors have sold bonds in anticipation of higher interest rates, and the yield on the benchmark note remains close to its highest level since 2018. Bond yields and prices move inversely.
Natural-gas prices in Europe rose 3.8%, after earlier leaping more than 20% on Wednesday. The moves came after Russia said it would halt gas flows to Poland and Bulgaria over their refusal to pay on Moscow’s new terms. Brent crude, the international benchmark for oil prices, fell 0.3% to $104.26 a barrel.
Among individual stocks,
Tesla
shares added 2.9%, on pace to recoup some of their losses after tumbling 12% Tuesday, its biggest one-day drop in more than a year. Twitter shares fell 3% to $48.26, about 11% below the $54.20 per-share-price that
Elon Musk
and Twitter agreed to in their deal to take the company private.
Boeing
shares were recently down 8.9%. The company posted a $1.24 billion quarterly loss and again pushed back the expected first delivery of its new 777X twin-aisle jet.
Microsoft
shares jumped 6.4% after the company on Tuesday reported higher revenue and profit last quarter as demand for its cloud services and software continued to climb.
On Tuesday, the Nasdaq Composite recorded its largest one-day percentage decline since September 2020, while the Dow dropped more than 800 points.
Photo:
Michael Nagle/Zuma Press
Chipotle Mexican Grill
shares added 1.9% after the burrito chain said total revenue increased 16% last quarter amid higher food, beverage and packaging costs—which the company said was partially offset by menu-price increases.
Lucid Group
shares gained 3% after the company late Tuesday said the government of Saudi Arabia had agreed to purchase up to 100,000 vehicles over a 10-year period.
Shares of Google parent
Alphabet
fell 3.7% after the technology behemoth posted slower sales growth amid disruptions in digital advertising spending.
Robinhood Markets
shares fell 5.1% after the online brokerage said it was laying off 9% of its full-time employees. The company is set to report earnings Thursday.
European stocks rose, with the Stoxx Europe 600 closing up 0.7%. Major markets in Asia were mixed, with benchmarks in Japan and South Korea falling more than 1% and Chinese indexes gaining.
The CSI 300 index of the largest stocks listed in Shanghai and Shenzhen rose 2.9%, recouping some of its recent losses. In Hong Kong, the Hang Seng Index was up 0.1%.
The rebound came after China on Tuesday reported its lowest tally of Covid-19 cases in three weeks, and President
Xi Jinping
highlighted the importance of infrastructure for economic growth, singling out transport, energy and water conservation. Machinery and building-materials stocks jumped.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com, Dave Sebastian at dave.sebastian@wsj.com and Karen Langley at karen.langley@wsj.com
U.S. stocks flipped higher Monday as government-bond yields retreated and investors took the opportunity to scoop up shares of beaten-down technology and other growth stocks.
The S&P 500 climbed 24.34 points, or 0.6%, to 4296.12 after dropping nearly 1.7% earlier in the session. The Dow Jones Industrial Average advanced 238.06 points, or 0.7%, to 34049.46.
The tech-heavy Nasdaq Composite Index rose 165.56 points, or 1.3%, to 13004.85.
Twitter
shares rose 5.7% after the social-media company accepted
Elon Musk’s
$44 billion takeover deal.
All three indexes had opened lower after Chinese shares suffered their worst selloff in more than two years as Beijing sticks to its zero-Covid strategy while faced with increasing cases in major cities. Oil prices fell, at one point dipping below $100 a barrel, before staging an afternoon rally.
A decline in bond yields signaled to investors that the Federal Reserve may not move to raise interest rates as aggressively as feared, investors said.
“Rates had been weighing against the market,” said
Jack Ablin,
chief investment officer of Cresset Capital. “Now what we’re seeing is a reversal of that trend.”
The yield on the benchmark 10-year Treasury note ticked down to 2.825% Monday from 2.905% Friday as investors sought safer assets to hold. Yields and prices move inversely.
“I think a lot of growth stocks have been punished too severely,” said
Brian Price,
head of investment management for Commonwealth Financial Network. “Part of what we’re seeing may be a reversal of that. Longer-term rates have just moved so far.
“The market is stepping back and assessing if they should have moved so fast. And falling interest rates tend to help growth stocks.”
Twitter rose $2.77 to $51.70.
Microsoft
climbed $6.69, or 2.4%, to $280.72, while Google parent
Alphabet
added $68.77, or 2.9%, to close at $2,461.48
Meantime, the S&P 500’s energy sector was the biggest decliner, falling 3.3%.
Schlumberger
fell $2.96, or 7.1%, to $38.69.
Halliburton
dropped $2.36, or 6.3%, to $35.33.
APA,
Apache’s parent company, slipped $1.63, or 4%, $39.08.
Investors are worried that strict policies China has in place to combat Covid-19 will further disrupt global supply chains. But the extended lockdowns, and a slowdown in China’s economy, also could crimp global demand for oil, investors said.
The Shanghai Composite and CSI 300 indexes fell 5.1% and 4.9%, respectively. Those were the largest single-day percentage declines for both benchmarks since February 2020, in the early days of the pandemic.
The offshore yuan fell about 1% to trade at about 6.59 per dollar. That was the lowest since November 2020, according to FactSet. The decline built on a selloff last week that ended months of relative stability.
As Shanghai remains locked down amid China’s biggest Covid-19 outbreak, residents are taking to social media to vent about a shortage of food or they are bartering with neighbors. Anxiety and hunger are prompting many to question Beijing’s pandemic strategy. Photo: Chinatopix Via AP
“The problem with inflation is it can get embedded and we see inflation getting quite sticky,” said
Sebastian Mackay,
a multiasset fund manager at Invesco. “What we’re seeing is a combination of the war in Ukraine and the lockdown in China causing supply issues.”
Limitation of movement in China also could sap demand for oil. Brent crude, the international benchmark for oil, fell 4.1% to $102.32 a barrel. Oil prices still remain near historically high levels due to concerns about disruptions to energy markets from Russia’s invasion of Ukraine.
In other corporate news, shares of
Coca-Cola
rose 69 cents, or 1.1%, to $65.94. The company said it logged higher sales for the latest quarter as demand held up in the face of price increases.
Advanced Micro Devices
added $2.55, or 2.9%, to $90.69 after a Raymond James analyst lifted his rating on the chip maker’s shares.
Elevated inflation has caused the Federal Reserve to increase efforts to combat it. Last week, Fed Chairman
Jerome Powell
signaled that the central bank is ready to tighten monetary policy more quickly and indicated that it was likely to raise interest rates by a half-percentage point at its meeting in May.
Money managers are worried that the Fed’s aggressive interest-rate increases could slow economic growth or even tip the economy into recession. This could lead to a situation where the Fed has to raise interest rates in the short term but cut them in the long term, Mr. Mackay said.
On Monday, the
Cboe
Volatility Index—Wall Street’s so-called fear gauge, also known as the VIX—approached its highest level since mid-March before retreating to 27.02.
The Dow Jones Industrial Average on Friday posted its worst one-day percentage change since October 2020.
Photo:
BRENDAN MCDERMID/REUTERS
Gold futures fell 2% to $1,893.20 a troy ounce. While gold is historically seen as an inflation hedge, it pays no yield, making it less attractive than government bonds in a time of rising interest rates. The cost of buying gold, which is denominated in dollars, also is more expensive for foreign investors when the dollar strengthens.
Overseas, the pan-continental Stoxx Europe 600 dropped 1.8%. South Korea’s Kospi declined 1.8%, and Japan’s Nikkei 225 contracted 1.9%.
How the Biggest Companies Are Performing
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Justin Baer at justin.baer@wsj.com