JP Morgan Chase kicked off earnings season this morning posting a first-quarter profit that was well below analysts’ expectations, although the bank’s revenue held up amid the coronavirus pandemic. The earnings drop was caused by a massive $6.8 billion addition to the bank’s credit reserves. The move signals that management expects a surge in defaults across the company’s lending businesses, from credit cards in its consumer division to energy, real estate and retail sector loans in its commercial operations. Wells Fargo also reported this morning, and set aside a smaller $3.1bn in reserves to cover anticipated defaults. (CNBC)
Airline industry officials expect all major airlines to accept the terms for the airline relief deal, with some announcements expected as early as today. The government has set identical terms for industry players and says it won't negotiate individually with airline managements. Those terms include a requirement that 30% of the funds allotted to each airline be repaid and the issuance of warrants with prices already locked in. The Treasury Department is not demanding compensation from small carriers receiving $100M or less in payroll support. If the $25B in grants is allotted as expected, the government could end up owning about 3.0% of American Airlines, 2.3% of United Airlines, 1.3% of JetBlue, 1% of Delta Air Lines, and 0.6% of Southwest Airlines. (SA)
Markets are putting yesterday’s drop in U.S. stocks behind them as optimism again rises that there is an end in sight to the lockdown in some of the world’s largest economies. Overnight the MSCI Asia Pacific Index rallied 1.7% while Japan’s Topix index closed 2.0% higher. Europe’s Stoxx 600 Index is on the cusp of a technical bull market. (FT)
With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.