Banks Cont'd To Drive US Market Higher Today?
December Inflation.
The December 2024 US Consumer Price Index (CPI) and Core CPI data were finally out.
Below is a quick recap.
Headline Inflation.
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MoM: came in at 0.4% vs analysts’ forecast of 0.4% vs November’s data of 0.3%.
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YoY: came in at 2.9% vs analysts’ forecast of 2.9% vs November’s data of 2.7%.
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Both headline inflation numbers increased by +0.1% and +0.2% respectively.
Core Inflation.
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MoM: was 0.2% vs analysts’ forecast of 0.3% vs November’s data of 0.3%.
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YoY: was 3.2% vs analysts’ forecast of 3.3% vs November’s data of 3.3%.
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Conversely, both core inflation numbers decreased by the same -0.1% quantum respectively.
Above is how the consumer price indexes have evolved over the past 4 years.
It is still quite far off from the 2% Fed’s target.
US Market - 15 Jan 2024.
Stocks surged Wednesday after (a) the latest core CPI inflation unexpectedly slowed in December and (b) 3 major US banks kicked off quarterly earnings reporting season with blowout results.
When trading ended on Wednesday:
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DJIA: +1.65% (+703.27 to 43,221.55).
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S&P 500: +1.83% (+107.00 to 5,949.91).
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Nasdaq: +2.45% (+466.84 to 19,511.23).
Sectors’ Performance.
Above is the stocks performances for the 11 sectors on Wednesday.
No prizes for guessing the Top 3 performing sectors of day:
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Financial - XLF.
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Consumer discretionary - XLY.
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Technology - XLK.
It was quarterly earnings from $JPMorgan Chase(JPM)$, $Goldman Sachs(GS)$, $Wells Fargo(WFC)$ and Citigroup (C)$ - announced before the start of Wednesday’s trading day that set the rally wheel in motion.
It is also the same reason why financial sector tops Wednesday’s sector performances.
Silent Financial Institution.
Although it seems like the Mega cap banks were the ones doing all the lifting in the US market rally, actually $BlackRock(BLK)$, (I feel) contributed in no small ways to yesterday’s rally too.
How so ?
Well, BlackRock - the world’s largest money manager, also released its quarterly earnings on Wed, 16 Jan 2025 and it was a set of good results too.
Quarterly Results:
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Earnings per share (EPS): came in at $10.63 per share, up +16.17% YoY (from $9.15).
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Net income: rose to $1.67 billion, up +21% YoY (from $1.38 billion).
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Total net inflow: was $281.4 billion, up +194.35% YoY (from $95.6 billion a year ago).
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Asset under management (AUM): Increased to $11.55 trillion. This is up +15.38% YoY (from $10.01 trillion) and up a year earlier and up +0.61% (from Q3 2024’s $11.48 billion).
Stock Price - Past 12 months.
Over the past 12 months, BlackRock's stock price has experienced significant fluctuations, reflecting broader market trends and company performance.
The stock reached its 52-week high of $1,065.28 on 11 Dec 2024, and its 52-week low of $747.30 on 18 Apr 2024, showcasing a substantial range.
The average stock price for t2024 was $872.89.
BlackRock's PEG ratio, that measures the price/earnings ratio adjusted for growth, is a key metric for evaluating its stock.
As of the latest data from Zacks.com, BlackRock's PEG ratio stands at 1.45, suggesting that the stock is reasonably priced relative to its earnings growth rate.
From a technical analysis perspective, BlackRock's stock has shown mixed signals.
The Relative Strength Index (RSI) is currently at 51.87, indicating a neutral position.
No wonder Morningstar has the following remarks about BlackRock latest quarterly earnings:
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Not expected to alter their “fair value estimate” of $1,100 per share, after its Q4 2024 and full-year results came in more or less in line with their expectations. (see below)
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BlackRock's stock currently trades at a significant premium compared to other similar US companies.
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This premium is considered justifiable.
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However, the shares are not offering enough of a margin of safety to recommend them.
BlackRock stock price as of 10 Jan 2025
US Market on Thursday.
I believe the US market will continue with its rally today.
The S&P 500 and Tech futures indexes are all in the “green” zone. (see below)
Catalysts that continue to fuel market rally:
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Remaining 2 US banks’ (Morgan Stanley and Bank of America) quarterly earnings are expected to exceed Wall Street’s consensus like its fellow banks.
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Regional US banks (US Bancorp and M&T Bank Corporation) are also expected to hand-in a good set of earnings too.
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Cooling inflation data continues to provide a significant boost to investor confidence.
The combination of (a) favourable economic data (eg. Non-farm payroll, Producer prince index and Consumer price index) and (b) strong corporate performances will fuel a bullish outlook for the US market.
My viewpoints: (mine only)
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While I am keen about BlackRock stock, the price point (at $1,013 per share) is too high a bar (for me).
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If only, BlackRock will consider a forward stock split to gain more traction and small-time investors.
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Failing that, will consider investing in its vast ETF product range.
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One particular that caught my fancy is $iShares Bitcoin Trust(IBIT)$ and its under my radar (for now).
Do you think US market rally will persist even after returning President Trump inauguration on Mon, 20 Jan 2025?
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