Market Update – 10/13/20

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Gloria Ghita

After a quiet week in the U.S. equities market due to improvements in President Donald Trump’s health and more visibility on the election, volatility has begun to spike with the approach of the earning season. On Oct. 13, equities were rattled by mixed reports from companies, mostly including airlines and banks.

Some stocks to watch include Amazon.com Inc., The Walt Disney Company, Blackrock Inc. and Johnson & Johnson. Eyes are on Amazon ahead of its annual Prime Day sales, which begins Oct. 13 and is expected to upend the holiday shopping season.

The Walt Disney Company was also in focus since it “announced a major reorganization intended to give priority to its streaming services,” according to The Wall Street Journal, riding on the success of Disney+.

Blackrock gained over 4% after the investment-management leader’s profits rose over 22%. Less positive news came from Johnson & Johnson which announced it was pausing its COVID-19 vaccine trials due to an unexpected and unknown illness in one of the volunteers. The news came as coronavirus cases have begun to rise again across the United States, and many state and city governments battle over reopening plans.

JPMorgan Chase and Citigroup also made headlines. JPMorgan Chase surprised investors with a larger-than-expected rise in profit, according to data obtained from The Wall Street Journal from FactSet, “the bank’s profit rose to $9.44 billion, or $2.92 a share, from $9.08 billion, or $2.68 a share, a year earlier. Analysts had expected $2.23 a share.”

Citigroup also beat analyst expectations, posting a “profit of $3.23 billion, or $1.40 a share, down from $4.91 billion, or $2.07 a share, in the same period a year ago. Analysts had expected 91 cents a share,” according to MarketWatch. Despite the better-than-expected profit gain, total revenue fell 7% to $17.3 billion from $18.57 billion in last year’s quarter.

Both banks have been hammered by the coronavirus, which has not only dragged down business, but has also required banks to set aside part of their portfolio for loan-loss provisions. Citigroup’s shares are down 43% this year, compared to the overall banking industry being down 30%, as tracked through the KBW Nasdaq Bank Index.

Airline stocks came under severe pressure on Oct. 13 as well, with Delta Airlines posting “a steep drop in sales for the most recent quarter and warning that the novel coronavirus would likely cut into demand for travel for years” according to The Wall Street Journal. Other airlines quickly followed in suit, with American Airlines and United Airlines posting losses as the morning progressed.

Internationally, the pan-continental Stoxx Europe 600 slipped 0.7%, while most benchmarks in Asia were mixed.

Forecasts for the remainder of 2020 have risen as well, with the International Monetary Fund now expecting the continuing downturn to be less severe than previously thought. Looking forward, eyes will continue to track U.S. equity markets, watching how COVID-19 has impacted the earnings of major U.S. companies.