Morning Market Recap: Stocks Rise on Record Wells Fargo Earnings

(CEP News) - U.S. stocks are more than 3% higher after Wells Fargo said it expects to earn a record $3 billion in the first quarter, more than double what the street was expecting.

Wells Fargo is seen as the healthiest of the large U.S. banks and shares of the company are up more than 25%. S&P 500 futures jumped 10 points immediately after the announcement and are up 24 points, or 2.9%, to 849.

In a press release, the company said it expects to report net income of approximately $0.55 per share. Analysts were expecting earnings of $0.23 per share.

"Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results," said Chief Financial Officer Howard Atkins in a statement.

Unexpectedly strong results from Wachovia contributed to about 40% of combined revenue.

"Wachovia's outstanding franchise has proven to be everything we thought it would be when we announced this acquisition, and the financial contribution from Wachovia exceeded our expectations in the first quarter," said Chief Executive Officer John Stumpf.

The Dow Jones industrial average was most recently up 193 points to 8030 and the Nasdaq was up 49 points to 1640. In Canada, the S&P/TSX composite index is up 138 points to 9108.

WTI crude oil is up $2.47 to $51.85. The front month gold contract at the Chicago Board of Trade is down $3.70 to $882.10 per ounce.

In foreign exchange, weaker-than-expected Canadian employment numbers are not having much impact on the Canadian dollar.

The Canadian dollar is up 0.0075 to 0.8161 against the U.S. dollar (1.2253 USD/CAD) and up 1.20 to 81.90 against the yen.

In March, the Canadian economy shed more than 61,000 jobs and the unemployment rate rose to 8.0%, according to Statistics Canada. Economists were expecting a decline of 50,000 jobs.

Elsewhere, the U.S. dollar is up 0.57 to 100.33 against the yen and the Dollar Index is down 0.230 to 85.131.

The euro is down 0.0016 to 1.3265 against the U.S. dollar, down 0.0167 to 1.6254 against the Canadian dollar, down 0.0007 to 0.9017 against the pound sterling and is higher by 0.62 to 133.09 against the yen.

The pound sterling is down 0.0004 to 1.4713 against the U.S. dollar and down 0.0162 to 1.8033 against the Canadian dollar.

In fixed income, U.S. two-year yields are up 3.2 bps to 0.96%, with five-year yields up 6.7 bps to 1.90%, 10-year yields up 5.2 bps to 2.91% and 30-year yields up 6.7 bps to 3.74%. The Eurodollar September 09 contract is down 1.0 tick to 98.87. The yield curve is steeper, with the 10/2-year spread up 2.1 bps to 195.20 bps.

Yields on two-year Canadian government bonds are up 4.3 bps to 1.14%, with five-year yields up 4.9 bps to 1.88%, 10-year yields up 6.0 bps to 2.96% and 30-year yields up 3.9 bps to 3.67%. The September 09 BAX contract is down 4.0 ticks to 99.45.

In Germany, returns on two-year German bonds are down 2.1 bps to 1.41%, with five-year yields up 1.0 bps to 2.44%, 10-year yields up 4.5 bps to 3.26% and 30-year yields up 1.9 bps to 4.08%.

Yields on UK two-year bonds are up 0.6 bps to 1.39%, with five-year yields down 0.6 bps to 2.51%, 10-year yields down 0.6 bps to 3.35% and 30-year yields up 1.5 bps to 4.35%.

All data taken at 10:08 a.m. EDT.

By Adam Button, abutton@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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