What’s News in Markets: Banks’ Inflation, Amazon AI, Boeing Again
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Hey, listeners. It's Saturday, April 13th. I'm Francesca Fontana for The Wall Street Journal, and this is What's News in Markets, our look at the biggest stock moves of the week and the news that drove them. Let's get to it. I'm going to sound like a broken record, but this week was all about inflation. I know, right? When is it not about inflation? Investors are trying to gauge if slash when the Fed might cut interest rates this year. So the indicator they were all watching was Wednesday's CPI report, Consumer Price Index, which basically measures inflation. The CPI rose more than expected in March, which disappointed investors. The prospect of rate cuts on the horizon has been fueling a lot of the recent rally in stocks, and now optimism is fading fast.
All in all, the three major stock indexes ended with weekly losses. Speaking of interest rates, they were a big part of big bank earnings that came out on Friday. Wall Street giants like JPMorgan Chase kick off each earnings season. Just an FYI if you're new to the rhythm of earnings season. So investors were watching Friday's reports from JPMorgan, Wells Fargo, and Citigroup to get a sense of how the banking industry fared in the latest quarter. The big takeaway? Inflation is becoming a thorn in their side. Let's look at JP Morgan, which posted better-than-expected quarterly profit and revenue, but projected muted growth for the rest of the year. Last year, higher interest rates were great for JP Morgan, helping the company bring in record profits as it charged more on loans.
But now they're putting pressure on its margins because as interest rates stay high, customers are moving away from no-to-low-interest checking and savings accounts and into products like certificates of deposit that yield higher interest. Great for those customers, not so great for the bank that has to pay them more in interest. So let's look at how the stocks did. JPMorgan shares dropped 6.5% on Friday, Citigroup lost 1.7%, and Wells Fargo edged 0.4% lower.
Amazon hit a new all-time high this week thanks to a fresh bout of AI optimism. Again, broken record. I feel like every other word out of my mouth is AI or inflation. So Amazon's CEO writes an annual letter to shareholders. And in his 2024 letter on Thursday, he said that generative AI could be one of the largest technological transformations in decades. Basically, like, the biggest thing since the internet. And in his letter, he laid out this vision for how the technology could be a critical part of the company finding its next pillar of growth.
How did this week’s CPI report change investors’ expectations for Fed rate cuts?
A little context, Amazon likes to refer to the big hits of its business as its three pillars, those being Amazon Marketplace, Amazon Prime, and its cloud computing business, Amazon Web Services. And for years, Amazon has been on the hunt for its next big hit, its quote-unquote fourth pillar. The company's tried branching out into areas like healthcare, in-person shopping, entertainment, etc. But so far, its fourth pillar has remained elusive. But apparently, AI is going to be the key to finding it. So investors reacted well to this year's letter, and the stock gained almost 2% on Thursday, pushing it to a record high above $189. Finally, let's talk about Boeing. You may be familiar with the jetmaker's litany of mishaps with its planes so far this year, and all of the federal investigations and scrutiny that's followed.
I've certainly talked about it here. And this week, Boeing's pile of problems just grew higher and higher.
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Chapters
2 chaptersSpeakers
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