Banking sector sell-off


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Last Week’s Highlights

JPMorgan misses interest income expectations

JPMorgan Chase reported a Q1 2019 profit of $13.42bn, beating estimates, but its shares fell 6% after forecasts for interest income fell short of analysts’ expectations. The bank slightly increased its estimate for net interest income (NII), but investors wanted more, hoping that the bank would reap greater benefits from a prolonged period of higher interest rates. The bank cited global conflicts, inflationary pressure and quantitative tightening as reasons for its cautious view on the economic outlook. Despite the warning, JPMorgan said that the US economy remained strong and that consumers still have excess money. 

Wells Fargo’s Q1 beats estimates

Wells Fargo has reported better-than-expected Q1 earnings with total revenues of $20.86 billion, beating consensus estimates of $20.15 billion. The bank’s earnings per diluted share were $1.20, compared to $1.23 in the same period last year and surpassed analysts’ expectations. However, the bank’s net interest income showed a decline of 8% YoY to $12.23 billion in Q1, due to higher interest rates affecting funding costs and customers migrating to deposit products with a higher yield. The bank’s management stated that investments across its businesses boosted its revenue from non-interest sources, making up for the decline in net interest income. 

Coming Up This Week

Salesforce to acquire Informatica

Salesforce is reportedly in discussions to acquire Informatica, a cloud-based data management company with over 5,000 active customers. The potential acquisition, which could be announced soon, would be Salesforce’s largest deal since it acquired Slack Technologies in 2020. The price being negotiated is said to be lower than Informatica’s current share price of $38.48. If the transaction is completed, it would be further evidence of increased merger and acquisition activity in the technology industry, which accounted for the majority of M&A transactions during the first quarter of 2023. 

Tesla to lay off 10% of workforce to cut costs

Tesla is set to cut over 10% of its global workforce following a review of the company to reduce costs and increase productivity, according to a memo sent by CEO Elon Musk. The job cuts come as Tesla grapples with falling sales and an intensifying price war for electric vehicles, with its shares falling about 31% so far this year. The automaker’s latest annual report shows it had 140,473 employees globally as of December 2023.  

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Market News

The U.S. stock market had a rough time on Friday, with major banks’ underwhelming results leading to a sell-off. This capped off a week of market-moving events, including inflation data, shifting expectations for U.S. Federal Reserve policy, and growing geopolitical tensions.

Unfortunately, the S&P 500 index saw its biggest weekly percentage loss since January, while the Dow Jones Industrial Average’s weekly loss was its steepest since March 2023.

The Dow Jones Industrial Average fell by a substantial 475.84 points, or 1.24%, to 37,983.24. Meanwhile, the S&P 500 lost 75.65 points, or 1.46%, closing at 5,123.41. The Nasdaq Composite also dropped 267.10 points, or 1.62%, to 16,175.09.

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Banking sector sell-off

JPMorgan beats profits estimates but misses income expectations. Salesforce plans a big acquisition, while Tesla to layoff 10% of workforce.