Traders Focus on JP Morgan

[Excerpted from Bill Cara's Daily Report]

The main focus of traders Thursday will be the 1Q2009 earnings report from JP Morgan (JPM), and the close scrutiny of the data and hype that will follow.

After hitting a low of $14.93 in early March, JPM has rallied +118.1% to Wednesday’s close of $32.56. There was a high of $34.15 on Tuesday..

JP Morgan reported Q1 net income of $2.14 billion, or $0.40/share, down -10% from a year earlier, but beat analysts' expectations. Revenue increased +48% to $25.03 billion. WSJ reported that CEO Jamie Dimon said the firm extended about $150 billion in new credit to consumer and corporate customers during the quarter.

With a last hour rally spurred by the real estate investment trusts (REITS) ($DJR +8.7%) and Banks ($BKX +5.1%) in the Financial sector (XLF +4.8%), the US equity market did close higher. But traders are nervous, and the post-midnight bankruptcy filing of one of the biggest REITs gave them cause to worry.

Despite the bullish tone and positive results from JP Morgan, the collapse of the credit market is a fact, and is weighing heavily today on the commercial REITS, following the chapter 11 filing of General Growth Properties (GGP). Traders will be watching for the potential fall-out in the REITs market ($DJR)..

By the close yesterday, the DJIA (+109.44 +1.38% to 8029.62, S&P 500 (+10.56 +1.25% to 852.06), and NASDAQ Composite (+1.08 +0.07% to 1626.80) were all higher, but not convincingly so.

The Toronto Composite (+14.49 +0.16% to 9246.11) and the Toronto Venture Board (+11.02 +1.13% to 987.94) were strong as well.

In the major international equity markets Thursday, Hong Kong (-0.51% to 15583.0) and Shanghai (-0.21% to 1322.6) were modest losers while others were modest winners, like Japan’s Nikkei 225 index (+0.14% to 8755.3) and Australia’s All Ordinaries index (+0.86% to 3725.6). After major gains this week, India closed sharply lower (-2.99% to 10947.4).

In Europe at 7:30am ET, France (+1.14%), Germany (+1.08%) and UK (+1.17%) were stronger, led by the banks and by Nokia (NOK)..

From AP, (Cara 100 $13.36, after-hours $14.40) Nokia Corp says its profits plummeted 90 percent in the first quarter amid a slump in demand for mobile phones. The world's top mobile phone maker says net profit was only 122 million euros ($161 million) compared to euro1.2 billion in the same period last year. Sales dropped 27 percent to euro9.28 billion from euro12.7 billion in the first quarter of 2008. As it presented its first-quarter report on Thursday, Nokia said phone sales were down 33 percent to euro6.2 billion.” NOK, which hit a 52-week low of $8.47 in early March, has rallied +70.0% in a month, leading up to this quarterly report. The chart looks toppy.

In NY yesterday, only the Tech sector (XLK -0.3%) was negative, and was led south by the semi-conductors ($SOX -1.5%).

For the Cara 100 companies, the winners were led by mostly non-US companies: Swiss company Syngenta (SYT +7.9%), China Mobile (CHL +6.3%), Russia’s Mobile TeleSystems (MBT +6.2%), and India’s Tata Motors (TTM) and ICICI Bank (IBN), both with gains of +6.1%. The losers were led by India’s Infosys Technologies (INFY -6.8%), Amazon.com (AMZN -3.3%) and Nokia (NOK -3.2%) of Finland.

The Syngenta stock price has been side-tracking year-to-date.

Wednesday, US Treasury yields dipped again on the 30-, 10-, and 5-year series as the long bond ($USB +0.21% to 127.92) had a modest gain. As reported yesterday, traders are avoiding risk this week, and bond prices are lifting. The T-Bill yield dropped sharply to 0.140 as traders seek safety.

The $USD gained some additional strength in narrow range trading (+0.32% to 84.98), while, against the USD, the Euro pulled back modestly (-0.21% to 132.26). The Yen (-0.51% to 100.60) was a loser, while the Pound (+0.74% to 149.99), and Cdn Loonie (+1.07% to 83.15) made up ground again against a rising $USD.

Crude Oil ($WTIC -0.75/bbl to 51.77) continued to head south after the inventory glut became a concern on the weekend.

$GOLD (+$1.50/oz to 891.20) traded erratically during the day, but closed modestly higher. After midnight, two selling programs have pushed the price a bit lower.

Spot (cash) market prices this morning at 7:30am ET (compared to Tues am) for gold, palladium, platinum and silver were: 888.45 (893.20), 233 (236), 1213 (1233), and 12.62 (12.70), respectively, which shows not much change.

DJIA futures at 7:30am were down -29 to 7951.

Traders are still waiting for the stocks to move in one direction or the other. There is some concern that the last-hour rally in the REITs was a trap. Pre-market for JPM is virtually unchanged from yesterday’s close at $32.56.

Comments

[Freya:]

the Banks which will benefit the Most will be those that were forced to take the largest write downs of assets which could not be priced.

Apr 16 02:45 PM