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Bank of America stock falls on lower Q4 profit

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Last Week’s Highlights

Bank of America profit shrinks

In the fourth quarter, Bank of America’s earnings declined due to one-time charges of $3.7 billion and lower interest income attributable to higher costs to retain customer deposits. Although the bank reported net income of $3.1 billion, or 35 cents per share, for the period ended Dec. 31, compared with $7.1 billion, or 85 cents per share, a year earlier, the stock was down about 1.2%. Despite these results, executives expressed optimism about the U.S. economy, highlighting the resilience of consumers. Analysts noted that net interest income was lower than that of competitor JPMorgan, prompting commentary on the quarterly comparison. Although net interest income fell 5% to $13.9 billion, loans are expected to experience low to mid-single-digit growth in 2024. Despite the weakness in interest income, Bank of America managed to offset some losses with solid gains in trading and investment banking. 

UnitedHealth had costs higher than expected

UnitedHealth shares experienced a 4% drop on Friday as the conglomerate’s medical services costs exceeded Wall Street expectations for the first time in two years. Despite beating profit and revenue estimates in the fourth quarter, the company said costs spiked at the end of the year due to high demand for respiratory syncytial virus (RSV) vaccines and additional medical services, especially among the older population. This phenomenon negatively affected other health insurers, such as CVS Health and Humana, which also recorded declines. The introduction of new RSV vaccines by Pfizer and GSK in the fall of 2023 contributed to this cost increase. Although UnitedHealth reiterated its forecast for 2024, some analysts expressed doubts about the company’s ability to manage the growing spending trend. 

Coming Up This Week

Tesla production hit by the Red Sea disruption

Tesla and Volvo Car production in Europe is affected by the shipping crisis in the Red Sea. Both companies suspend part of their production due to component shortages, marking the first sign of a direct impact on regional manufacturers. Recent attacks on Yemen by the U.S. and Britain have disrupted one of the world’s most important shipping routes, leading to an increase in container shipping rates. The global supply chain faces one of the biggest upheavals since the COVID-19 pandemic, with consequences that could affect global economic recovery and fuel inflation. The crisis in the Red Sea affects a range of sectors, from the automotive industry to freight forwarding, with companies such as Geely, IKEA, and Target warning of potential delivery delays. The situation raises concerns about shortages on the shelves in the coming months, affecting multiple industries and generating declines in Tesla and Volvo Car shares. Other automakers could face similar problems soon. 

Delta Air Lines scaled down its annual profit outlook

Delta Air Lines revised its 2024 profit projections due to rising costs, supply chain issues, and economic risks. The company’s shares fell more than 8%, affecting the NYSE Arca Airline index. Adjusted earnings per share for this year are now expected to be between $6 and $7, compared to the previous projection of more than $7. The company attributed this adjustment to rising wages, inflation, and supply chain constraints. Despite the uncertainty, Delta maintains strong demand, but parts and labor shortages are driving up maintenance and repair costs. The company has also reduced its hiring plans by more than 50% by 2024, including pilot hiring. Although concerns persist about travel spending due to the rising cost of living, Delta reported that it has surpassed record bookings this week. Despite the downward revision, Delta beat Wall Street estimates on fourth-quarter earnings, posting an adjusted profit of $1.28 per share. For the first quarter, the company expects adjusted earnings of $0.25 to $0.50 per share, below market estimates. 

All information provided was collected up to the last business day of the previous week of the release of this NewsFlight. The purpose of NewsFlight is to summarize and make accessible information on a variety of topics within the world of investing and personal finance, and thus cannot be considered formal research or reports. All sources utilized to compile the NewsFlight newsletter are considered trustworthy by the FlexInvest team. FlexInvest is not affiliated with and does not receive remuneration from the news sources used to compile NewsFlight. As well, any images or logos incorporated into the NewsFlight newsletter are not necessarily property of FlexInvest and may solely be included to provide context for the news covered. NewsFlight should not be taken as advice to sell or buy securities or to make any investment. When investing in securities or other financial products, there is always the potential to lose money or asset value. FlexInvest recommends that its users consider their investment objectives and risks before investing. Additionally, any projections or analysis made by authors of NewsFlight cannot be considered as a promise of future trends or returns. Opinions expressed in NewsFlight are not representative of FlexInvest.

Market News

On Friday, U.S. equity markets closed with minimal variations, experiencing swings between small gains and losses. The mix of bank results counterbalanced the news on inflation, which turned out to be more moderate than anticipated, generating expectations of possible interest rate cuts by the Federal Reserve.

For the week, the Dow Jones index rose 0.34%, the S&P 500 posted a 1.84% increase, and the Nasdaq experienced a notable 3.09% advance. The S&P’s gains represented the largest weekly percentage increase since mid-December, while the Nasdaq’s gains were the most significant since early November.

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