- Moby
- Posts
- January 12th | Morning Brew
January 12th | Morning Brew
TEST
TOGETHER WITH
Today’s report is brought to you by Morning Brew. Free, Fast, and Fun News in Just 5 Minutes
[ good morning ]
Here’s everything you need to know today
Welcome to a real mixed-bag earnings season where—more than ever—volatility reigns. We’re seeing a lot of strength from winning stocks, and that’s frankly all the market needed to start driving back toward all-time highs again.
We also got wind of the first real big piece of fallout from the strain this is causing supply chains—Tesla is dropping hard thanks to reports that the company has to pause production at their Berlin Gigafactory to allow their supply chains to catch back up. Delays thanks to Red Sea rerouting are going to continue to reverberate across the economy for the next few weeks even if shipping resumes tomorrow.
But earnings season is lining up with broad expectations—as the banking system is increasingly just watching JP Morgan beat estimates while everyone else falls behind. Rising costs are starting to have all sorts of interesting impacts all across the economy.
So, with more inflation data showing that wholesaler prices are cooling, let’s gear up for a volatile and mixed earnings season as some parts of this market push toward recovery faster than others.
Hold onto your butts folks—2024 just kicked into high gear and shows no signs of slowing down.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ banking ]
JP Morgan Tops Messy Bank Earnings
Banking is still a huge mess—but there are some silver linings
BREAKING NEWS
Earnings season kicked off with major banks this morning, and to no one’s surprise, JP Morgan is the big winner here. Let’s break down the major trends.
WHAT HAPPENED
JP Morgan was the standout—driving a solid $3.04 EPS from $39.94 billion in revenue. Those earnings were strong, but The Street was expecting stronger. At the same time, JPM managed to drive record net interest revenue and expects even more this year. That was enough to drive their stock higher in early trading.
MONEY MESS
However, Wells Fargo and Bank of America are falling thanks to ongoing profit woes as those institutions struggle to recover. Technically, Citibank suffered one of the worst declines after getting hit with a whole mess of charges in Q4, but the stock managed to get some lift as the bank began outlining their restructuring plans for the year. When in doubt, cut.
WHY IT MATTERS
These results are honestly in line with expectations. Most stocks ran a little hot in December on rate-cut euphoria, and only the strongest players were going to be able to justify these higher valuations. The banking system looks fundamentally strong here. As always, the only major concern is JP Morgan running away with all the gains while every other bank struggles to keep up.
Get Smarter in Just 5 Minutes a Day with Morning Brew’s Newsletter
Are you tired of dull, dry news that takes up too much time? Say hello to Morning Brew, the daily newsletter that takes 5 minutes to read and is filled with witty, informative content that makes reading the news both quick and enjoyable.
They know your time is valuable, so they carefully curate the most relevant and important news stories from around the world, and present them in a fun, engaging, and free newsletter. Whether you're a seasoned entrepreneur, a budding investor, or simply someone who wants to stay up-to-date on the business world, Morning Brew has something for you. Join over 4 million people who start their day with Morning Brew’s newsletter and discover why they’re the ultimate source of business news. Sign up now and never miss a beat.
Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.33% | 4.50% | 41.93% |
| Consumer Disc. | -0.13% | 1.12% | 26.65% |
| Consumer Stap. | -0.01% | 2.21% | -3.42% |
| Energy | 0.26% | 0.63% | -7.79% |
| Financials | -0.37% | 2.87% | 4.93% |
| Health Care | -0.07% | 5.97% | 4.36% |
| Industrials | -0.23% | 1.47% | 9.55% |
| Materials | -0.30% | 1.56% | 0.25% |
| Real Estate | -0.93% | 3.10% | -0.51% |
| Technology | 0.51% | 0.86% | 48.13% |
| Utilities | -2.33% | -1.05% | -12.76% |
*Market data based on standard trading hours and calculated close to close
[ healthcare ]
United Health Drops as Cost Concerns Mount
This is the 7th time in 10 quarters that costs came in above expectations
BREAKING NEWS
United Healthcare ended the year with a surprise as medical costs drove increased fears about future growth. Let’s break down the numbers.
WHAT HAPPENED
United managed to drive genuine growth here—generating $5.46 billion in net income from $94.43 billion in revenue. Both of those smashed expectations—and United beat their EPS projections for the 20th quarter in a row. So why is the stock selling?
SYSTEM SHOCK
Despite increasing profits, actual medical costs keep rising. United’s ratio of medical costs to premium revenue (or MCR) rose to 85% in Q4—which is a sharp increase from last year’s 82.5%.
Basically, actual medical procedures are getting more expensive and complex, and no matter how much United has streamlined efforts on their end, those costs can become burdensome in the long run. There are a few other factors at play here, but costs are the main focus.
WHY IT MATTERS
With an aging population in the states—medical costs are going to be increasingly in the spotlight over the next decade. Providers like United have a much more complicated medical system to deal with, especially as hospitalizations rise this winter. That is becoming more and more a long-term risk that some investors don’t have an appetite for, it seems. United Health stock fell around 3% in early trading.
[ aerospace ]
Delta Tumbles Despite Profit Beat
Rising profits just can’t beat reduced guidance and supply issues
BREAKING NEWS
Delta Airlines posted a barn-burner of an earnings report showing they crushed profit expectations for Q4. So, of course, the stock is down bad this morning. How does this happen?
WHAT HAPPENED
Delta made a solid $1.28 EPS from $13.66 billion in revenue thanks to surging international travel and more premium options. Both of those crushed expectations as Delta kept fuel costs under control even as oil prices fell. But the stock market is more focused on the future.
TURBULENT OUTLOOK
Basically, Delta has reduced their outlook a little for the full year as Q1 is looking even quieter than usual. At the same time, there are concerns about supply issues for Delta and whether the FAA will approve an order Delta has for dozens of 737 Max 10 aircraft.
WHY IT MATTERS
This is more a case of the stock market running a little too hot in December than anything. Delta is in a strong position as inflation continues to improve and the stock is simply finding a more appropriate level. Delta stock fell over 6% in early trading.
Extra Moby Snacks
Tesla stock got hit hard in early trading. There’s a wide spectrum of issues here— Tesla has initiated more price cuts. They also need to temporarily halt production at their Berlin Gigafactory thanks to supply issues caused by Red Sea delays. The stock fell around 2.3%
BlackRock increased their fund dominance today as they announced a $12 billion acquisition of Global Infrastructure Partners. The stock stayed flat despite concerns that the buyout was a little pricey.
TOGETHER WITH
Today’s report is brought to you by Morning Brew: Free, Fast, and Fun News in Just 5 Minutes