Stock futures cut gains after banking reports

JPMorgan beats estimates. Wells Fargo is light on revenue. Ecolab agrees to buy Champion Technologies.

By TheStreet Staff Oct 12, 2012 9:16AM
Updated at 9:16 a.m. ET

By Andrea Tse

U.S. stock futures were paring gains Friday after JPMorgan Chase's (JPM) third-quarter earnings report raised some red flags and Wells Fargo (WFC) reported lower than expected revenue.

Futures for the Dow Jones Industrial Average ($INDU) were up by 19 points at 13,284. S&P 500 ($INX) futures were up by 3.50 points at 1,431. Futures for the Nasdaq ($COMPX) were rising by 3.25 points to 2,717.

JPMorgan reported third-quarter results that blew past Wall Street estimates.

The company reported third-quarter earnings of $5.7 billion, or $1.40 a share, beating the consensus estimate of $1.24, among analysts polled by Thomson Reuters. Third-quarter revenue totaled $25.1 billion, beating the consensus estimate of $24.5 billion.

However, during the quarter the firm also saw a significant decline in credit quality, as nonperforming assets grew by 10%.

"The big global banks -- the JPMorgans, the Goldmans, they're all in that camp where they look dirt cheap, like they're easy doubles, but they've got still a lot of unknown exposure on their balance sheets. Exposure to Europe, exposure to a lot of things," said James Kee, president and chief economist of San Antonio's South Texas Money Management.

"The larger banks have run up a lot and so valuations are not as attractive as they were say a year or two years ago," said Leo Kelly, managing director at Hightower. "However when we look at these larger banks, as spreads contract, as you get a better housing picture  -- that's favorable to banks overall because if we get a better credit picture in the U.S. and if housing prices start to recover,  then estimates for foreclosures and write-downs for foreclosures and bad credit go down. When those go down, these companies can release reserves. And that goes right down to the bottom line."

"The minus is that there are significant revenue streams that they no longer have. Regulation has increase dramatically here in the U.S.," said Kelly. "I don't think anyone really has their hands around what that means yet."

Wells Fargo, facing a lawsuit for its mortgage practices related to the financial crisis, posted third-quarter adjusted earnings of 88 cents a share, beating estimates by a penny. Revenue came in at $21.2 billion, below the consensus call for $21.47 billion.

"All of these companies are much stronger than they were prior to the crash," said Kee.

"The key to some of the bigger the banks is what their economic profile is going forward. I mean in the last 20 years financials basically was a group that had very high return on equity. But with the financial regulation going forward, a lot of their ability to generate revenue is going to be changed and altered because some of the products that they sell are going to be more regulated. So we do think that the profiles going forward are going to be different. The question is, how different?"

The Bureau of Labor Statistics reported that the producer price index rose 1.1% in September after advancing 1.7% in August. Economists were expecting the index to rise 0.7%.

The core read that excludes food and energy costs was unchanged after rising 0.2%. Economists were anticipating an uptick of 0.2%.

The University of Michigan Consumer report for October will be released at 9:55 a.m. and is forecast to have fallen to 78 from 78.3.

The FTSE 100 in London was down 0.27% and the DAX in Germany was falling 0.45%. The Nikkei Average in Tokyo closed down 0.15% and the Hang Seng in Hong Kong finished up 0.65%.

November crude oil futures were up 9 cents at $92.16 a barrel. December gold futures were down 80 cents at $1,769.80 an ounce.

The benchmark 10-year Treasury was down 4/32, lifting the yield to 1.69%. The dollar was down 0.21%, according to the dollar index.

Ecolab (ECL) shares were gaining more than 3.5% after the developer and marketer of  products and services for the hospitality, foodservice, healthcare and industrial markets said it will buy privately held energy products and services  company Champion Technologies  for $2.2 billion in cash and stock.

Advanced Micro Devices (AMD) forecast Thursday third-quarter revenue of $1.27 billion, a 10% sequential decline. Previously, AMD had predicted a sequential decrease of 1%, plus or minus 3%.

Analysts were looking for sales of $1.38 billion.

More from

Oct 12, 2012 11:37AM
Consumer confidence SOARS !  Where mabye on planet Jupiter ? More BULL "S"  ! Consumer confidence is in the TOILET !  Gas at $ 4.70 for regular, food costs rising every week !  Hey ALL IS WELL according to the media its going to be a great Holiday season for the American middle Class !
Oct 12, 2012 12:14PM
I have come to realize that Thomson Reuters just spins in favor of big business and corruption. I don't WANT to read any of their articles because they are bogus. Unfortunately, since Microsoft let NBC begin running this MSNBC Money site, the reporting has been inaccurate. Sorry losers, but the public KNOWS the economy BLOWS and that wealth will do anything they can to make it not look like they are controlling and manipulating. Guess what? YOU ARE controlling and manipulating. Where do you go once you've screwed the whole world? I can guarantee you that your heirs won't appreciate your windfall wealth when it lands them life in prison sentences. Start SPENDING it on Main Street until it's gone. Tell your heirs to get cracking on something other than slacking. You know where you can shove your New World Order.
Oct 12, 2012 11:47AM
4 Love  If my memory still serves me and early signs of Alzheimer have not set in ! I remember a few weeks ago you called my vineyard a GRAPE PATCH ! Now young man I take offense to that comment ! It is not a PATCH but a beautiful vineyard !
Oct 12, 2012 11:18AM
Not surprisingly at all, manipulators called for the selling to start at 1100 hrs, the S&P is now negative as well as the Nasdaq and the Dow should follow suit shortly...Nothing is made up people. we call it as we see it and many times as its happening....Like we say over and over, when these cheating crooks take control there is very little anyone can do...Oh well, we will see what else happens...More later.
Oct 12, 2012 10:33AM
We were just up over 70 points, however, be cautious. Remember yesterday, don't get suckered in; manipulators are out in droves once again so no lead is safe...The call to sell may come at anytime, too many of these scumbags on and off the floor, all week has been the same...Cheaters in charge...More later.
Oct 12, 2012 9:45AM
JPM Chase profits up by 34% go figure after cooking their books these numbers sure look good? More BULL "S" from this criminal banking organization to lie to its investors ! One week ago this bank was accused of securities FRAUD= A GREAT LIAR ALWAYS TELLS THE TRUTH ! THAT IS JPM CHASE ! Take you money and your investment portfolios out of this bank today !
Oct 12, 2012 12:16PM
So... Jamie Dimon outran the "whale" by pumping out tons of bad mortgages. You know the Fed Board agreed to keep buying bad paper while doling out more cash. Jamie Dimon is a sitting Board Director for the Fed, so essentially, he just committed a CRIME to make sure his bank won't lose a dime.

SHUT JP MORGAN CHASE DOWN NOW. END THE FEDERAL RESERVE. Jamie belongs behind bars not comfy in an Ivory Tower suite.

Oct 12, 2012 3:06PM

Do not get too hopeful because we turned positive.....Just another sucker's rally....Scumbags in control down here....All we can do is try to minimize the damage this last hour...Crooks enjoying a heck of a week for them, they stole plenty of money while most hard working Americans lost a bunch....More after the close.

Oct 12, 2012 3:03PM

Obama/Biden = 2

Romney/Ryan = 0


Democrats RULE!

Republicans are FOOLS!


God bless America!

Oct 13, 2012 7:48AM

So... Jamie Dimon outran the "whale" by pumping out tons of bad mortgages. You know the Fed Board agreed to keep buying bad paper while doling out more cash. Jamie Dimon is a sitting Board Director for the Fed, so essentially, he just committed a CRIME to make sure his bank won't lose a dime.

SHUT JP MORGAN CHASE DOWN NOW. END THE FEDERAL RESERVE. Jamie belongs behind bars not comfy in an Ivory Tower suite.

********** Wall Street must have agreed with me. JPM finished down yesterday. Hey Jamie, come out here and play REAL PERSON today.

Oct 12, 2012 3:49PM
Oct 12, 2012 4:51PM
Do not get fooled because the Dow ended flat...It was an awful week....Full of sucker's rallies and manipulators owning the floor, on and off actually....The stole tons from people this week, they are very proud...Too bad most real Americans lost tons....Oh well, they know they can and will get away with it...Now, next week they will want to continue the cheating, have no doubt about that...Have a great weekend all.
Oct 13, 2012 11:15AM

Andrea Tse.....A later update to your Article, might be needed; It's helpful to us that REALLY read it, or have an "Interest" in the Markets or Equities/stocks that are making unusual moves during the day..?


Maybe you come in early, to cover the overnights and futures?

But an update around 11 or 12 noon....Would get us through the day.....Unless you are gone.

But anyway, enjoy reading....And some of us come here for other reasons then just to vent or spew garbage about the political front;

We are not all 10 cent pundits, with little worthwhile knowledge....Thanks.

Oct 12, 2012 11:22AM
EXCEO.  I concur with your comments from yesterday.  The DOW as an amalgam of companies is mercurial. It has never consisted of the same entities over the decades.  At least the S&P represents a broader assembly of firms and is therefore, more telling. And yes, especially in hindsight.  So, the same sound principles of investing (either for Cap Gains or Income) have never changed, not even during this era of HFT and "long term" meaning 20 seconds.   Thanks for your insights. Have a great weekend.
Oct 12, 2012 10:22AM

Good article Andrea....But today will probably be babbling about the Debate...

Really nothing to discuss....Joe, said what they have done, were doing and what they were going to finish...

Ryan...More or less talked about extending one War, and starting another; Maybe two ??

And I just didn't see where Seniors or the Middle Class were going to have a chance at survival...?

And the poor were going to be a write off..

But the Rich would fare quite well....And the Repubs would work across the Aisle, as long as they controlled the House and the Senate....Otherwise NOT.

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