Wall Street Hit by Bad News: Stocks Fall Amid Economic and Geopolitical Concerns

Dear Readers,

It was a rough trading day on Wall Street as markets got hit with bad news from all angles. JPMorgan Chase, the nation's largest bank, gave an underwhelming forecast for net interest income this year, citing higher deposit costs. 

Citigroup and Wells Fargo also expect net interest income to fall, leading to a decline in their respective shares. The University of Michigan's consumer-confidence reading edged down Tables and CSVs - Surveys of Consumers (umich.edu), while inflation expectations for the year ticked up, fueling concerns about the Federal Reserve's ability to lower rates. 

Additionally, unsettling news from the Middle East, including reports of imminent direct attacks and the deployment of U.S. warships, further contributed to the market decline.

The Dow Jones Industrial Average fell 476 points, or 1.2%, while the S&P 500 and the Nasdaq fared even worse, declining 1.5% and 1.6% respectively. Treasury yields, which had been rising on inflation fears, fell back amid safe-haven bond buying. Gold reached a new record high, reflecting heightened geopolitical tension.

Amid these challenges, there is hope for improved investor moods with the potentially strong earnings as the quarterly reporting season continues next week.

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JPMorgan Chase generated $13.4 billion in net income in its just-reported first quarter, up just 6% from a year prior. Those numbers don’t appear to be exciting Wall Street, with JPMorgan shares tumbling on Friday. But under the hood, JPMorgan has a lot more earnings power in store because of the big capital buffer it has built up.

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Earnings season continues in full force next week with reports from companies including Goldman Sachs, Johnson & Johnson, UnitedHealth Group, and Netflix.

Paramount shareholders have been revolting at the idea of the company getting acquired by Skydance Media. Wall Street is equally skeptical. Only 28% of analysts rate Paramount’s shares a buy, which is the lowest percentage of bullish ratings on any major media firm, according to FactSet.

Some members of the board seem to share that lack of faith. It was reported that four directors are stepping down from the board - including one who only joined last year. Paramount's subsequent proxy filing confirmed the departures.

Thank you for staying informed!

Daniel Silva