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Stock Markets Fall After Bank Earnings; BlackBerry Gets a Facebook Lift

By Dan Caplinger - Updated Jan 15, 2021 at 12:59PM

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Earnings season didn't get off to a perfect start.

Market participants have been watching the state of the economy closely, especially as a leadership transition in Washington is underway. Markets reacted Friday morning to the release of President-elect Joe Biden's stimulus plan, which includes increased aid to Americans as well as several more controversial measures. Some investors were concerned by the package and its price tag, which sent stocks lower. As of 11:30 a.m. EST, the Dow Jones Industrial Average (^DJI -3.57%) was down 147 points to 30,845. The S&P 500 (^GSPC -4.04%) fell 19 points to 3,776, and the Nasdaq Composite (^IXIC -4.73%) dropped 60 points to 13,052.

This year has seen the stock market's upward momentum from last year continue, but investors have been waiting to see what companies would say about how their businesses are doing. Earnings season has finally started, and market participants are getting their first readings on how top market players finished 2020. Today major bank stocks JPMorgan Chase (JPM -1.71%) and Wells Fargo (WFC -3.66%) released their latest results, and shareholders weren't entirely satisfied with what they saw. Meanwhile BlackBerry (BB -2.16%) shares soared as investors celebrated an apparent settlement with Facebook (FB -5.12%).

Bank vault metal door and ramp up to inner room.

Image source: Getty Images.

Not good enough

Shares of bank stocks were generally lower on Friday morning. JPMorgan Chase was down 2%, while Wells Fargo suffered a 6% decline.

JPMorgan's drop came despite some strong numbers from the banking giant. Net revenue climbed 3% from year-ago levels, and net income jumped 42% year over year, largely because of the release of $2.9 billion in credit reserves. A reduction in share counts boosted the growth in earnings per share to 47%. All of those figures were better than most of those watching JPMorgan had expected.

JPMorgan saw huge deposit growth, even though it hasn't really increased its loan portfolio by much. Nevertheless, investors were impressed by that performance, given the sluggishness in the economy. The bank also had strong results in its institutional trading segment as assets under management soared.

Wells Fargo didn't fare as well. Revenue was down nearly 10% from year-ago levels, and although the company's net income was higher, it grew by only 4% from the previous year's fourth quarter. Wells saw declines in loan activity in its consumer, commercial, and corporate banking segments, and although deposits were generally higher, a weak interest rate environment kept net interest income low.

Both banks expect to restart their stock buyback programs, and that could provide some support to the stock. For now, though, investors seem not to have gotten everything they wanted from the reports.

BlackBerry puts a legal battle to bed

Shares of BlackBerry were up 13% Friday morning. The move follows a big jump on Thursday, and investors finally have a good idea of the cause.

Multiple sources reported that BlackBerry had come to a resolution of patent disputes between the mobile phone pioneer and Facebook. The two companies had been arguing over the amount of royalties that Facebook should pay BlackBerry for the use of some of its messaging intellectual property.

Investors have hoped that BlackBerry will be able to get things moving in the right direction again. After having bowed out of handset production, BlackBerry has reinvented itself, aiming to provide a common platform on which different sensors can communicate and share information.

In the meantime, BlackBerry also has an impressive portfolio of intellectual property. It's likely that the company will be able to keep seeing licensing revenue come in -- especially if it can successfully defend its rights from other tech giants.

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Stocks Mentioned

JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$120.09 (-1.71%) $-2.09
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$192.24 (-5.12%) $-10.38
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$42.11 (-3.66%) $-1.60
BlackBerry Stock Quote
$5.88 (-2.16%) $0.13
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,490.07 (-3.57%) $-1,164.52
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,923.68 (-4.04%) $-165.17
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,418.15 (-4.73%) $-566.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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