After the Tech Sell-off: Big Bank Earnings, Hot PPI, Tesla 11-day Win Streak Snapped 7/12/24

Jim Cramer (0:00)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:07)

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Sarah Eisen at Post 9 of the New York Stock Exchange. Cramer has the morning off. Futures pretty solid as we watch for signals as to whether yesterday's rotation was the real deal.

Bank earnings in focus. PPI does come in a tad warm. Yields still lower at the short end, two year below four and a half. Our roadmap begins with the banks. Investors watching for warning signs in the banking system. JPM and Wells see a profit drop. Citi revenue rises.

David Faber (0:34)

AT&T shares are under some pressure this morning in the company, reporting that hackers stole records of nearly all cellular customers' calls and their texts.

Sara Eisen (0:44)

And trouble for Tesla. Shares set to sink for a second day after reports of a robo taxi launch delay.

Carl Quintanilla (0:51)

Let's begin with some market reaction to the banks today. Interesting split in the action, Sarah, or at least price-wise between, say, Citi and Wells on their results.

Sara Eisen (1:00)

Well, also, just the higher rates picture is affecting these banks differently. We always look at the net interest income.

And it was a big miss on Wells, and that's partially potentially why the stock is getting punished today. We're gonna talk to the CFO of Wells Fargo on money movers. But the 9% decline in net interest income, David, the fact that they don't appear to be making as much progress on the expense side, which was the bull case in part for the stock, that's certainly two of the knocks against Wells Fargo that I'm seeing this morning. But you don't see, for JP Morgan, that net interest income number was a beat, a slight beat.

And they reiterated guidance. So I think there's a question now of how rates settle now that we're expecting two cuts from the Fed and whether we've seen the bulk of the gains that the banks have made profitability-wise from these higher interest rates.

David Faber (1:51)

Yeah, JP Morgan, as you say, a different story. As you take a look, the stock is not doing much. It's perhaps going to be down. They got a, I mean, they posted a 20% return on tangible common equity, bigger than expected buyback as well.

The strength there was capital markets, wealth management and cards.

There were sort of trends in loans and deposits a bit flattish in terms of guidance. NII, what Sarah's been talking about, came in more or less as expected. But generally seen as a very positive quarter for JPM, nonetheless, as you can see, the stock really doesn't seem to be reacting. Although quite a difference from the last quarter, we should point out, when the stock was down sharply on earnings. As you point out, Wells Fargo, I think there are a lot of investors though, who are still lined up there for the what is yet to come in terms of the benefits of the turnaround that's taking place under Charlie Sharf. Although this is not a quarter, I guess that's gonna particularly excite them, Sarah.

Sara Eisen (2:53)

When the asset cap will be lifted, which we don't know, and we ask every quarter and they don't know, and the Fed doesn't know, and nobody's telling us anything like that. So that's potentially the part of the problem. The other thing I just noted in the JP Morgan quarter is that the credit loss provisions were a little bit higher than expected. There was a $3 billion build, 3.1 billion of credit costs, which was higher than anticipated. They had an $800 million incremental reserve bid. So that's always something to watch as we wonder sort of where we are in the credit cycle and what these banks are seeing ahead. The commentary from Jamie Dimon continues to sound a bit cautious, even in the face of good news. I mean, it came right up top in his statement in the release where he said there's been progress of inflation, but he's still worried about it. While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks. There's been some progress in bringing down inflation. This is what I was talking about. But there are still multiple inflationary forces in front of us, large fiscal deficits and infrastructure needs, restructuring of trade and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects.

These bankers continually warn about this.