CE 100 Index Adds 1.1% as Bank Earnings Blunt Gains, iRobot Plummets 20%

Friday heralded the official kick off of earnings season, with banks leading the charge.

Within the CE 100 Index, gains seen in the work segment were blunted by the bank segment’s 2.8% slide. For the week, the CE 100 Index added 1.1%.

Banks Weigh In

J.P. Morgan slipped 1.9% for the week.  In our own coverage of earnings, we noted that consumer spending is still strong. But as management commentary on the call noted, spending may moderate as it outpaces any momentum in building up deposits. Credit and debit spending was up 7%, but average deposits were down 6% year on year.

J.P. Morgan expects the 2024 card net charge off rate to be below 3.5%, as average unemployment should be around 5.5% in the year ahead. “I think it’s uncontroversial that the economic outlook has evolved to include a significantly higher probability of a soft landing. That’s, I think, the consensus at this point,” said CFO Jeremy Barnum, who added that “consumers have been spending more than they’re taking in.”

Citigroup shares slid 3.1%.  As reported Friday, services revenues rose 16%. Card loans jumped 9% year on year, per the supplementals, while non-conforming loans as a percentage of average loans came in at 3.8%, up from 2.2% last year.

Ally Financial shares gave up 6%.  Last week, the company named its president of dealer financial services, Douglas Timmerman, as its interim CEO. Timmerman will assume the role Feb. 1, following the departure of current CEO Jeffrey J. Brown at the end of the month. Ally Financial announced in October that Brown would step down early in 2024.

Beyond the banking names, and amid notable decliners, iRobot lost 20%. In an update on the European Commission website, news came that Amazon has not provided any remedies to alleviate concerns raised by EU antitrust regulators regarding its $1.4 billion acquisition of iRobot. The absence of proposed remedies from Amazon now leaves two possible outcomes on the table. It could result in the deal receiving unconditional EU antitrust approval, suggesting that the Commission is satisfied with Amazon’s arguments or concessions. We noted that the lack of remedies might also pave the way for an EU veto of the acquisition.

Despite the stock declines noted above, the CE 100 Index managed to eke out is 1% gain as work-related names were up 5.8%.

DocuSign shares surged 16% in that segment, followed by CrowdStrike, which added 14.5%.

DocuSign rallied on the heels of news that Bain Capital and Hellman & Friedman are competing to acquire the company for as much as $1.5 billion, according to unnamed sources, and as reported by Reuters.

Last month, DocuSign, declined to comment on a media report that it is considering a potential sale.

CrowdStrike’s jump came amid a slew of positive analyst reports on Wall Street.

Investing sites including The Motley Fool reported that J.P. Morgan added CrowdStrike to its Analyst Focus list of growth ideas and reiterated its “overweight (buy)” rating on the shares. It also raised the firm’s price target to $300 from $269, as the Motley Fool reported.