S&P 500 off lows as banks erase losses after kicking off earnings season

By Yasin Ebrahim

Investing.com -- The S&P 500 moved off session lows Friday, after major Wall Street banks erased intraday losses as investors weighed up a string of better-than-expected results, and commentary on a worsening economic outlook. 

The S&P 500 rose 0.10%, the Dow Jones Industrial Average gained 0.09%, or 30 points, and the Nasdaq Composite was up 0.27%.

Wall Street banking stalwarts JPMorgan Chase&Co (NYSE:JPM) and Bank of America Corp (NYSE:BAC) reported quarterly results that beat on both the top and bottom lines, underpinned by rising interest rates that boosted loan growth. Wells Fargo &Company (NYSE:WFC) and BlackRock Inc (NYSE:BLK) also delivered better-than-expected quarterly results, while Citigroup (NYSE:C) reported a fall in profit on higher credit costs.

The mostly better-than-expected results were accompanied by gloomy remarks on the economic outlook.

JPMorgan said a “mild recession” was its base case and warned that it was beginning to see a slowdown in its auto lending business at a time when the bank’s home lending business has also come under pressure.

The latest University of Michigan survey on consumer sentiment, however, pointed to a much healthier economic outlook, hitting a 12-month high. But that was driven by a fall in energy prices, which some believe may prove temporary.

“The narrative has swung too much in the favor of lower commodity prices going forward,” Will Rhind, CEO and Founder of GraniteShares told Investing.com’s Yasin Ebrahim in an interview Thursday. “But that [energy] is still a sector of the market where they are big concerns and problems with supply.”

“Don’t look for the price of energy, oil, or gas to be on linear move down from here…I think that there’s still a lot of potential for a surprise to the upside, especially with the ongoing war in Ukraine,” Rhind added.  

Elsewhere on the earnings front, Delta Air Lines (NYSE:DAL) also reported a beat on both the top and bottom lines. The airline's outlook on first quarter earnings of between $0.15 to $0.40 a share fell short of estimates amid higher labor costs. 

In other news, Virgin Galactic (NYSE:SPCE) said it was on track for a commercial launch in the second quarter of 2023, sending its shares more than 9% higher.

Defensive stocks were also a drag on the broader market, paced by a decline in the Lockheed Martin Corporation (NYSE:LMT), and Northrop Grumman (NYSE:NOC) after Goldman Sachs delivered a cautioned outlook on the sector as concerns about U.S. government debt could weigh on defensive spending.  

Tesla (NASDAQ:TSLA) fell nearly 3% after Guggenheim downgraded the stock to Sell from Neutral on worries that the company’s fourth-quarter results, due Jan. 25, are likely to fall short of Wall Street estimates. The electric vehicle company also slashed prices in Europe and the U.S. to boost waning demand. The price cuts come just weeks after the EV maker cut prices in China for the second time in as many months.