The Recovery Continues but Perhaps Not as Rapidly as Expected

North American markets today, Wednesday, appear set for a mixed and positive opening. The NASDAQ is positive at time of writing. However, the DOW and S&P 500 are in the red but are steadily improving at time of writing and could very possibly make it into the green before or after market opening at 9:30 a.m. EST. The safe havens of gold and silver are in the red. The Canadian dollar is down while the Euro and British pound sterling are up.

European markets are open at time of writing and major indicators there are all positive.

That follows the highs and lows of yesterday. The highs included a record high for the S&P 500. The NASDAQ outperformed with TESLA leading the way, thanks to a fresh crypto push, according to Joshua Mahony Senior Market Analyst at IG Group, a London stock firm. TESLA finished the day at $762.32, up $60.34 or 8.6% on the day. The effect of the crypto push means that investors in TESLA and even the NASDAQ and S&P 500 ‘are now by proxy invested in crypto-currencies’ Mahony explains.

Other tech drivers included Microsoft which finished at $258.49, up $2.58 or 1.01% on the day and PayPal Holdings Inc. which finished at $275.43, up $6.40 or 2.3% on the day. rose $20.61 or .61% to finish at an eye-popping $3400.00.

JPMorgan Chase & Co reports first-quarter results today. Investors and analysts have high expectations and will be looking for clues about consumer and corporate lending. Goldman Sachs Group also reports first quarter results today and investors will be looking for whether its trading division can sustain its high levels. Wells Fargo & Co. also reports first quarter results today while Bank of America Corp. reports its first quarter results tomorrow and is also expected to provide clues on consumer and corporate behavior. Citigroup Inc. also reports first quarter results on Thursday and Morgan Stanley is expected to report first quarter results on Friday.

Taken together these results will provide a composite of the banking sector, an update on the recovery and some clues about what can be expected for the rest of the year.

Some of the lows were surprising and some were not. United States banks weakened ahead of today’s earnings season kick-off, Mahony explains. JPM Morgan Chase & Co. closed at $153.98 down $1.97 or.1.26% on the day while Goldman Sachs dropped a surprising $4.56 or 1.37% to close at $327.28. Wells Fargo dropped $1.02 or 2.50% to close at $39.75.

The lows here may not be as surprising as they seem in Mahony’s estimation. ”Interestingly, US banks have taken a step back ahead of (today’s) earnings season kick-off, with the rise in US CPI failing to incite hopes of a margin-improving rate rise anytime soon,” he says. At the same time, recovery hopes have become mixed with the fallout from the Archegos Capital disaster he says. “Whilst many will be looking for the banks to give an idea of just how hard the pandemic has hit the economy, there is likely to be just as much emphasis on trying to quantify the losses Goldman Sachs and Morgan Stanley endured or avoided after the Archegos Capital debacle,” he says.

The lows also included a drop in Johnson & Johnson shares by $2.08 or 1.29% to close at $159.56. That followed news that health authorities had recommended suspending J&J’s COVID-19 vaccine after reports of blood clots in six women. That brought with it a general worrying about the recovery although investors seemed to shrug off concerns about these reports.

The news may have a different impact in Europe according to Mahony. “In a move which echoed issues surrounding the AstraZeneca vaccine, the emergence of similar issues with the Johnson & Johnson product comes as a particular blow to the EU (which) started taking shipments of the drug (on Monday),” he says.

“Meanwhile, with Novavax warning that they will be unable to fulfil their supply targets thanks to material shortages, the global vaccination programme looks destined to remain uneven as supply fails to match the huge demand,“ he says. The net impact on European recovery remains to be seen.

So, the recovery will continue but perhaps not as rapidly or as evenly as we had hoped.

Related: This Will Be a Big Week in the Financial Sector