U.S. retail sales declined for the third straight month in December, according to data from the U.S. Census Bureau. Advance estimates for retail and food services sales were down 0.7% in December from November, a sign that a worsening pandemic is negatively impacting consumer spending.
The Dow Jones Industrial Average (DJINDICES:^DJI) was down about 0.5% at 12:15 p.m. EST as investors digested the retail sales data. JPMorgan Chase (NYSE:JPM) stock underperformed the Dow after the bank's earnings report was poorly received despite a big rise in profits. Meanwhile, Apple (NASDAQ:AAPL) stock dipped slightly against the backdrop of Chinese smartphone giant Xiaomi being added to the U.S. blacklist of Chinese military companies.
JPMorgan Chase reports strong results
A big jump in profits for JPMorgan wasn't enough to prevent the stock from slumping on Friday. JPMorgan's fourth-quarter results beat analyst estimates across the board, but investors just weren't impressed.
The mega-bank reported revenue of $30.16 billion, up 3.4% year over year and about $1.4 billion higher than the average analyst estimate. Earnings per share came in at $3.79, up from $2.57 in the prior-year period and $1.17 better than analysts were expecting.
The surge in profits was largely due to credit reserves being released. JPMorgan took big charges in previous quarters in anticipation of loan losses related to the pandemic, building up its credit loss reserves. The company released $2.9 billion of those reserves in the fourth quarter, leading to a net benefit of $1.9 billion for its provision for credit losses. That compares to an expense of $1.4 billion in the prior-year period.
The commercial banking segment accounted for most of that net benefit, which caused segment net income to more than double. Profits also surged in the corporate and investment bank segment, while the consumer and community banking segment saw a much smaller profit increase.
CEO Jamie Dimon made clear that the company is still anticipating plenty of uncertainty related to the pandemic. "While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists," he said.
Shares of JPMorgan were down about 1.8% by early Friday afternoon. The stock has surged more than 40% over the past six months.
Chinese smartphone giant added to U.S. blacklist
Xiaomi was designated by the U.S. Department of Defense as a Chinese military company on Thursday. Under an executive order issued last year, the move will force investors to divest any stake they have in the Chinese smartphone company.
Xiaomi had the fourth-largest smartphone market share in China in the third quarter of 2020, according to Counterpoint Research, just ahead of U.S. tech giant Apple. While the designation could hurt Xiaomi's prospects, the escalation by the U.S. could lead China to retaliate against U.S. companies in some way.
China is an important market for Apple. The company generated over $40 billion of revenue from the country in fiscal 2020, nearly 15% of its total. In terms of growth prospects, China is one of Apple's biggest opportunities. While the company has a dominant market share in the U.S., its market share in China was just 8% in the third quarter of last year.
Any retaliation from China against Apple could hurt the company's results. Apple stock was down about 0.25% by early Friday afternoon, so investors don't seem to be all that concerned. Shares of Xiaomi were down about 5%.