U.S. Markets open in 3 hrs 3 mins

Stocks Close at Record Highs as JPM and WFC Impress with Earnings

Dan Berman
Hot Stock Minute

Stocks yet again closed at records highs, gaining strength right into the close. The rise in stocks this week was fueled by Fed chair Ben Bernanke who suggested that quantitative easing will remain in place for quite some time. On the economic front, the Labor Department said producer prices rose 0.8% in June, beating expectations for a climb of 0.5%. Separately, the Thomson Reuters/University of Michigan Surveys of Consumers' preliminary July consumer sentiment index fell to 83.9. The final figure for June was 84.1. Expectations had been for a reading of 85.0.

Two out of three is not bad, especially when it's the larger two of the three. Powerhouse banks JPMorgan (JPM) and Wells Fargo (WFC) beat estimates this morning with release of their quarterly earnings. JPMorgan posted profits of $1.60 a share when estimates were for $1.44. Profits were in fact up 31% from the same quarter a year ago. The company pointed to strength in its investment banking business as well as a reduction in reserves for loan losses. Revenue for the quarter was just shy of $26-billion when estimates had been for $24.84-billion.

Meanwhile, Wells Fargo's beat was not as robust. The bank exceeded estimates with EPS 0f $0.98 versus expectations for $0.93. Revenue however was nearly flat at $21.4-billion compared to $21.29-billion for the same quarter a year ago. Profits were up 19% on improved credit quality, but the company may be hurting from rising interest rates. Mortgage-related income decline 3% year-over-year to $2.8 billion. Wells Fargo has a 22% share of U.S. mortgage originations, making it the largest U.S. home lender.

As for the third and final bank to report earnings today, substantially smaller Webster Financial (WBS) met the consensus EPS estimate of $0.48. It just missed estimates on revenue with about $147.1-million. Forecasts had been for $147.8-Million. Webster Financial has a market cap of about $2.4 billion; just yesterday it was downgraded to neutral from buy at Sterne Agee.

The prognosis is exceptional for WebMD (WBMD). Company shares jumped more than 25% as the company raised its full-year outlook and beat Q2 expectations. WebMD now expects to post a profit of $0.05/share on $125 million in revenue. The company previously projected sales of $115 million with losses being about 1% of that.

Spreadtrum (SPRD) rose 12% as it accepted a takeover bid. Spreadtrum is a Chinese chipmaker but trades here under the symbol SPRD. It's taking a buyout offer from China's Tsinghua, which follows an earlier proposal from Tsinghua for $1.4 billion. Spreadtrum shares had already been up 46% year-to-date, largely on that prior offer which was first submitted last month.

Aveo Pharmaceuticals (AVEO) earned back some of its losses, finishing even for the day after it had been down 11% after yesterday's close. A Massachusetts-based company that specializes in developing cancer drugs, Aveo has disclosed that it received a subpoena from the SEC earlier this month requesting information about one of its treatments for kidney cancer.  Shares for the company are down 68% year-to-date.