The big banks kicked started the earnings season, with JP Morgan Chase beating on the top and bottom lines, boosting the stock prices early on Friday during the North American trading session.  Capital markets trading was the weak spot in JP Morgan Chase’s earnings report as the Bank said that low volatility kept spread tight reducing the company’s revenue generating opportunities. Facebook was also in the headlines as the company announced some changes to their news feed that weighed on the share price.

JP Morgan Earnings

JP Morgan, the largest U.S. bank announced earnings per share that beat expectations climbing to $1.76 compared to expectations that earnings would be $1.69. Revenue was also better than expected increasing by $25.45 compared to expectations that the top line would rise by $25.15 billion. JP Morgan reported a significant charge in the Q4 of $2.4 billion due to uncertainties surrounding the effect the Tax Cut and Jobs Act passed in December. This comes despite a potential windfall for the company as the effective tax rate for 2018 will decline to 22% from 35% due to the tax plan.  Capital markets trading in the fixed income, currency and commodity space, were the weak sector for the banking giant.

Wells Fargo Earnings

Wells Fargo reported its financial results on Friday revealing the company earned $1.16 per share on $22.05 in revenue. This compares to expectations that the banking giant would earn $1.07 per share on $22.38 in revenue. In early trade the stock price was lower as the revenue miss spooked traders. The miss also came despite a tax gain where most banks are expected to report a tax loss. Wells Fargo reported a $3.35 billion after-tax increase or $0.67 per share. The company also reported a tax gain from the sale of Wells Fargo Insurance Services.

Facebook Shares Drop as New News Feed is Announced

Facebook shares moved lower on Friday following an announcement by the company that they were changing the flow of your news feed.  Currently each Facebook user’s news feed is crafted together to show a mix of business and paid content with posts from your friends. The goal of the company is to create a softer approach where your news feed is focused on “friends” interaction that goes beyond likes.  The move shifts the company’s focus from generating revenue from adds on a news feed to one that is more user focused.  Facebook has faced scrutiny over the way it works and how Russian advertisement during the 2016 election could have affected the results.

Tax Cuts are Helping Stock Prices Surge

Stock prices continue to grind higher led by gains in the Industrial sector.  Bowing, GE and Caterpillar are all hitting fresh highs, which is helping the Dow Industrials outperform. Traders are pricing in the new tax laws and despite heavily overbought conditions, share prices continue to surge higher.  Until traders see Q1 earnings, the immediate effect will continue to be priced in to share prices.

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