[4/14/20]Stocks finish higher as earnings season begins, clouded by uncertainties caused by the coronavirus pandemic.
Stocks were rising Tuesday after JPMorgan Chase (JPM) – Get Report, Wells Fargo (WFC) – Get Report and Johnson & Johnson (JNJ) – Get Report kicked off an earnings season clouded by uncertainties caused by the coronavirus pandemic’s upending of the global economy.
Signs that virus infections were leveling off in certain countries also gave a boost to sentiment, as did President Donald Trump saying his administration was working on a plan to reopen the U.S. economy.
The Dow Jones Industrial Average finished up 558 points, or 2.39%, to 23,949, the S&P 500 rose 3.06% and the Nasdaq ended up 3.95%.
Apple (AAPL) – Get Report, Microsoft (MSFT) – Get Report and Walgreens Boots Alliance (WBA) – Get Report led the Dow’s advance.
As the big U.S. banks get earnings season started, the focus will be on not so much the quarter just ended but on what companies say they are expecting for the rest of 2020.
Many companies already have pulled guidance for the year, explaining that the coronavirus pandemic and the damage it has done to the global economy make it hard to present reliable forecasts.
“First-quarter earnings are basically irrelevant, other than any impact on debt covenants,” said Lamar Villere, portfolio manager of the Villere Balanced Fund.
“Commentary on how the past month has gone is much more useful with guidance as investors try to figure out worst-case scenarios,” Villere added.
The International Monetary Fund said Tuesday the global economy will contract 3% in 2020 as countries went into lockdown to try to prevent the spread of the virus. The IMF had forecast in January that GDP would rise 3.3%.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression,” said Gita Gopinath, the IMF’s chief economist, in the group’s latest World Economic Outlook report.
JPMorgan Chase (JPM) – Get Report reported lower-than-expected first-quarter earnings as coronavirus-related charges trimmed the bottom line of the biggest U.S. lender.
JPMorgan said first-quarter earnings were 78 cents a share, down nearly 63% from the year-earlier period.
Corporate and investment-banking charges topped $951 million for the quarter, while a near $900 million charge linked to a program of inter-company bridge loans lowered its first-quarter earnings by 22 cents. It also boosted its capital buffer, which cushions the bank against potential losses, in order to absorb an $8.3 billion wave of credit losses.
“The first quarter delivered some unprecedented challenges and required us to focus on what we as a bank could do – outside of our ordinary course of business – to remain strong, resilient and well-positioned to support all of our stakeholders,” said Chief Executive Jamie Dimon.
Wells Fargo (WFC) – Get Report set aside some $4 billion in loan-loss provisions in the first quarter related to the Covid-19 pandemic and corresponding economic fallout, almost five times what it allocated a year ago and the most in a decade, leading to a near-90% drop in net income.
Johnson & Johnson (JNJ) – Get Report posted stronger-than-expected first-quarter earnings but trimmed its full-year profit guidance amid the coronavirus pandemic.
J&J said it expected full-year earnings of between $7.50 and $9.50 a share, down from a prior forecast of $9 to $9.15 a share.
Johnson & Johnson also said it would pay a quarterly dividend of $1.01 a share, a 6.3% increase from its previous payout.
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Stocks in the U.S. on Monday had ended mixed as Wall Street came off a stellar rally last week that was spurred by the Federal Reserve’s plan to pump more than $2.3 trillion into the economy.
The number of confirmed global cases of the coronavirus has risen to 1,970,225, according to the Johns Hopkins Center for Systems Science and Engineering, and deaths increased to 124,544.
The U.S. has 598,670 cases of the coronavirus, the most in the world, according to Johns Hopkins CSSE. Deaths in the U.S. have risen to 25,394, also the most in the world.
