Healthy quarterly earnings results from JPMorgan Chase lifted sentiment on Wall Street, but this failed to drag the markets very far out of the doldrums and the broader indices closed only fractionally higher.
JPMorgan, the first large bank to report its first-quarter earnings, reported a 67 per cent jump in profit, beating forecasts, as a better performance of its credit card division offset losses from its mortgage business. The company reported first-quarter net earnings of $5.6bn, or $1.28 per share, surpassing the $1.15 per share expected by analysts. The company dividend was also increased fivefold to 25 cents a share and a $15bn stock buy-back programme was initiated.
Shares in the group were initially up 1.4 per cent, but retreated after Jamie Dimon, the chief executive, said the company would see no further dividend increases for several quarters. The shares finished 0.8 per cent lower at $46.25.
The rest of the financial sector was also up in early trading but lost ground the session continued, not helped by news in the afternoon that Federal bank regulators had ordered major banks to review their foreclosure practices. The S&P financial index hovered in neutral territory for much of the day but closed down 0.8 per cent.
But the results from JPMorgan still served to raise hopes elsewhere on Wall Street that the current earnings season would be strong. Investors were disappointed on Tuesday when the first company of the season to report, Alcoa, announced disappointing first-quarter revenue.
The benchmark S&P 500 index closed fractionally higher at 1,314.41. Sentiment was not particularly helped by the equivocal news that US retail sales had risen 0.4 per cent in March. This was the ninth consecutive month of growth, but it was also one of the slowest improvements since the summer.
The Dow Jones Industrial Average put on 0.1 per cent to 12,270.99 while the Nasdaq Composite added 0.6 per cent to 2,761.52. These slight gains ended a four-day losing streak on Wall Street in which the S&P 500 index has fallen 1.6 per cent.
Analysts and investors explain that the markets are sandwiched between an improving domestic economy and the promise of a healthy earnings season on the one hand and higher commodity prices and global unrest on the other.
“The market is still trying to sort out what higher commodities prices mean for real growth,” said Brian Gendreau, market strategist with Financial Network. “The International Monetary Fund is saying that commodity prices will not curtail the global recovery, but the markets are still nervous, and appropriately so,” he said.
Bob Baur, chief global economist at Principal Global Investors, said: “If you look at all the problems around the world – in the Middle East and Japan – as well as US housing and budgetary issues, it is amazing the stock markets are as high as they are.”
“So it would not surprise me to see the stock market stay flat here or continue to correct for another few weeks,” he said.
In corporate news, Tyco International lost 0.6 per cent to $52.01 after Schneider Electric said it was “not currently” in takeover talks with the maker of security systems, as had been rumoured.
Tyco put on 11 per cent in the first two days of the week on speculation that a $30bn takeover bid was being discussed. Tyco is still 10.3 per cent higher over the week, however, suggesting investors have not yet dismissed the possibility of a deal.
Energy stocks bounced back from losses in the previous session. Chesapeake rose 1.5 per cent to $32.40 while Murphy Oil added 0.5 per cent to $73.40. The S&P energy index was up 0.3 per cent. Tesoro, the petrol refiner, was up 4.1 per cent to $26.25 after the company that it set up in which it has a large stake, Tesoro Logistics, unveiled the estimated terms of its initial public offering.
Riverbed Technology, a networking equipment maker, was up 12.4 per cent to $34.74. Silgan Holdings, the manufacturer of consumer goods packaging products, was up 18.9 per cent to $43.80 after agreeing to buy Graham Packaging for $4.1bn, including debt. Graham Packaging rose 32.9 per cent to $22.20.
Zoom Technologies soared 31.5 per cent to $4.07 after the Chinese mobile phone maker signed a license agreement with Qualcomm to allow it to sell 3G products using the chipmaker’s patents.
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