Chevron Weighs Down the Dow as Wells Fargo Leaves Wall Street Wanting More

Wells Fargo's earnings release kicks off the financial sector's season of results on an up-and-down close to the week for investors

Jul 11, 2014 at 2:30PM
Daily Fool

An unsettled market has struggled through the day so far as earnings season revs up, but the Dow Jones Industrial Average (DJINDICES:^DJI) has fought to 16 points in the green as of 2:30 p.m. EDT. The index's 30 member stocks were starting to lean toward risers. However, Chevron (NYSE:CVX) fell 1.5% to the bottom of the index. However, the biggest stock news has come from the financial world, as Wells Fargo (NYSE:WFC) led off the banking sector's earnings run today. Let's catch up on what you need to know.

Is Chevron poised for a second-quarter beat?

Chevron Gas

Source: Wikimedia Commons.

Production issues and volatile international affairs have hammered Chevron and other oil giants recently, but the company forecast better results ahead. The company's interim second-quarter report yesterday said that sales of regional assets around the world, including a batch from Chad, should help push earnings higher from the company's disappointing first quarter, when earnings slid by 27% year over year. Falling production affected those results, but the company projected second-quarter U.S. production growth of nearly 4% quarter over quarter and almost 1%, year over year.

Still, challenges remain. The company's overall production remains on a downbeat path, as Chevron's international production slipped both quarter over quarter and year over year in the first two months of the second quarter. The company also expects currency issues to deliver up to a $300 million hit for the quarter.

While analysts anticipate roughly flat sales and earnings growth year over year for the second quarter, investors need to keep a close eye on Chevron when it reports results on Aug. 1. This stock has jumped by more than 11% in the last three months, and a big disappointment could lead to shareholders taking profits on the climb.

Perhaps the most closely watched news on the day came from outside the Dow. Wells Fargo stock has fallen by 0.4% after the big bank reported earnings today and Wall Street came away with mixed emotions from the results. While the bank managed overall net earnings growth of 3.8%, revenue fell by 1.5% for the quarter. That was enough to beat average analyst projections on the top line, but questions remain about where the bank -- and the financial sector as a whole -- could be headed.

The housing market's slowdown in 2014 took a toll on Wells Fargo's results. Mortgage originations plunged by more than 58% year over ear. The bank's net interest margin also declined both year over year and quarter over quarter. Wells Fargo did show optimism in growing auto loans and lowering its expenses in writing off bad loans, but for the country's largest lender of mortgages, housing's sluggishness this year has hurt. The bank's overall increase in lending in the quarter is promising, but investors in this stock, which has jumped by more than 15% so far in 2014, could certainly have hoped for more out of the second quarter.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Chevron and Wells Fargo. The Motley Fool owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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