PYMNTS-MonitorEdge-May-2024

CE 100 Index Surges 6.3% as Banks Kick Off Earnings Season

JPMorgan

Macro level data suggests inflation is cooling, and bank earnings suggest consumer spending is resilient.

In tandem with the investor sentiment that interest rate hikes may be slowing or the Fed might pause altogether, the CE 100 Index surged 6.3%. That positive performance outpaced the broader markets, where the tech-heavy Nasdaq trailed with a 4.5% gain.

The positive momentum came as all segments finished in the black for the week – a rarity for the CE Index.

As to the inflation rate, government data showed inflation rate to a 14-month low of 6.5%. That data, through the December Consumer Price Index report from the Bureau of Labor Statistics, helped push equities higher into the week’s end.

Banks Gain Ground

Banks were in the spotlight, as the Banking Pillar soared 7.2%. The big banks kicked off earnings season in earnest on Friday (Jan. 13). And though these marquee financial services names took billions of dollars in reserves, they remained sanguine on consumer spending and credit quality. Sales volumes were up significantly, in online and offline channels, and across all verticals — especially travel.

J.P. Morgan reported fourth-quarter results that showed credit and debit sales volume was up 9% in the quarter, year over year, to $411 billion. Active mobile customers gained 9% to 49.7 million consumers.

Other filings released in tandem with earnings show that the J.P. Morgan Payments business logged $4.4 billion in the most recent quarter, up 18% year on year. J.P. Morgan shares were up 7.4% on the week. Separately, and within our banking segment, Citigroup also saw a 5.5% gain in the past five sessions as spending was up double digits, too.

Gains for the Enablers, Too

The Enablers Group led the pillars’ uptrend, up 8.4%. These names are tied to business spending. Earnings reports and staffing cuts from the likes of Salesforce and others through the past several months have pointed to headwinds from inflation.

As inflation abates, enterprise spending may pick up on tech that helps reduce workloads, and sales cycles may shorten. Other companies saw their shares climb as they introduced new initiatives to help make it easier for companies to gain some top line momentum.

Mongo DB shares were up 16.3%, C3.ai gained 15.4% and Amazon was up almost 14%. Needham’s Mike Cikos maintained a “buy” rating on MongoDB with a price target of $240 (the stock closed Friday $197.53). The rating came in the wake of a fireside chat, where Needham and MongoDB management discussed a total addressable market that could be worth more than $20 billion.

Amazon shares were up in a week that saw Buy With Prime made available to a greater swath of merchants in the U.S. For Amazon, broadening the offering taps into the chance to achieve payments ubiquity as speedy delivery remains a competitive advantage.

The fees Amazon will charge for the service have not been disclosed, and the money it makes here would be tied to the fulfillment, storage and handling of inventory. As we noted in our own coverage, the growing importance of third-party selling efforts was apparent in the company’s latest third-quarter results, where the revenue contribution was $28.7 billion, up 23% year on year, excluding foreign exchange impact.

PYMNTS-MonitorEdge-May-2024