With markets closed today, watch the biggest moving stocks for Tuesday. Markets fought off the initially negative implications of hot December inflation. Inflation rose by 0.34% and is up 3.4% from last year. This is well above the 0.2% and 3.2% estimates, respectively. Bears needed to quickly close their negative bets when Treasury bond yields were “uninverted.” The 2-year Treasury fell by 2.57% last Friday to 4.15%. The 30-year Treasury closed at 4.15%.
The yield un-inversion suggests that the U.S. economy will face a recession next. Expect interest-sensitive stocks to continue their drop from last week. Bank of America (BAC), down 4.73% last week, and Wells Fargo (WFC), and Citi (C) are the financial institutions to watch today. They all traded too high ahead of their earnings report.
Citi is an especially troubling bank stock to buy. The company is executing its transformation plan engineered by Chief Executive Officer Jane Fraser. This will result in a massive 20,000 job cut, or 10% of staff, over the next two years (through 2026). In 2024, Citi expects to write down $700 million to $1 billion in severance and reorganization-related costs. Its expenses will top $53.5 billion to $53.8 billion.
Bank of America might trend lower this morning after posting revenue declining by 10.5% Y/Y to $21.96 billion in its fourth quarter. It took a provision for a credit loss of $1.1 billion.
Wells Fargo included a negative $969 million in severance-related expenses. Its PCL will increase, hurt by credit card losses and commercial real estate loans.
