Weekly Equities Outlook: JP Morgan, Wells Fargo & Tesco

What to watch?

US banks will kick off the Q1 earning season on Friday. The reports come amid rising recession fears weighing on the sector, sending share prices sharply lower across the past week alone.

Given Trump's worse-than-expected tariff announcements and escalating trade fears, the first-quarter performance will likely be old news, and the focus will be much more on the risks ahead. Attention could turn away from Fed policy and interest rates and a key concern will likely be credit risk particularly ass JP Morgan lifted its recession probability to 60% up from below 20% at the start of the year.

Expectations for trading are high, given record trading volumes in several asset classes; however, other areas, such as investment banking, may be limited. While strong numbers are likely for the previous quarter, the outlook is incredibly uncertain.

JP Morgan Q1

After beating earnings and revenue forecasts for the fiscal year 2024, upcoming earnings will attract significant attention, given the potential economic fallout from the newly imposed import tariffs. The share price pulled back from its all-time high in mid-February and declined steadily before dropping sharply last week to a 6 month low.

JP Morgan will report Q1 earnings ahead of the market open on April 11th, with Wall Street expecting EPS for the quarter to be $4.66, compared to $ 4.44 in Q1 2024. Revenue is forecasted to be $ 43.01 billion,

These figures follow a solid Q4 with record results, including a 50% increase in profits to $ 14 billion on a 10% increase in revenue, totaling $43.7 billion. At the time of the results, Jamie Dimon stated that the US economy remained resilient and that risks to inflationary pressures persisted. Dimon's commentary on the current macroeconomic environment and regulatory landscape will be closely scrutinized. Attention will also be focused on provisions for credit losses, given rising concerns about a recession.

How to trade JPM earnings?

JPM’s rally, which began in 2022, encountered resistance at 278, the record high, before rebounding lower. The price broke below the multi-year rising trendline, support around the 225 zone, and the 50 SMA. This, combined with the bearish engulfing candle and RSI below 50, keeps sellers hopeful of further losses. Support is seen at 200, ahead of the 100 SMA at 188. Any recovery would need to take 225 ahead of 250 before bringing 278 back into focus.

Wells Fargo Q1

Wells Fargo will report Q1 numbers on Friday, ahead of the open. This comes after the share price popped following Q4 numbers, which were released in January, reaching a record high above $81.00 before falling lower.

Wells Fargo is a major US lender whose fortunes are closely tied to the health of the US consumer and the credit market. This means that Wells Fargo could be particularly vulnerable to the prospect of a recession, so provisions for bad loans will be closely monitored.

In the previous quarter, net income increased 47% to $5.1 billion, driven by revenue of $20.38 billion, which was slightly lower than the year-ago period.

Expectations are for Q1 revenue to be $20.78 billion and profits of $1.23 a share.

How to trade WFG?

Wells Fargo had been rising from a low of $33.35 in March 2023, forming a series of higher highs and higher lows, and had run into resistance at 81.00. The price then rebounded lower, breaking below support at 70.00 and the 50-week SMA with a bearish engulfing candle. This,  combined with the RSI below 50, keeps sellers hopeful of further losses.

The price is finding support at 50. A break below here opens the door to 54.30, the 100-week SMA and 50 support zone. Any recovery must rise above the 50 SMA at 64.50 and 70 to negate the downtrend.

Tesco FY results

On Thursday, Tesco will publish its full-year results. These come after the share price hit a multi-year high earlier this year, which has fallen sharply amid fears of a price war with Asda, as the latter aims to regain market share.

Time will tell whether these concerns are legitimate; however, it's worth noting that Asda's aggressive move is considered difficult given the imminent increase in wages bill due to higher National Insurance contributions.

Tesco upgraded its profit guidance alongside its half-year results, and we reaffirmed this when it released its Christmas trading update.

Tesco's market share rose from 27.3% a year ago to 27.9% in the 12 weeks to 23 March, whilst the combined share of Asda and Morrisons fell from 22.3% to 21%. Meanwhile, Tesco is also seeing off competition from Aldi as it positions itself to be the cheapest full-line grocer.

Expectations are for a 15% increase in Group sales to £71 billion, up from £61.6 billion. Operating profit is expected to rise between 8% and 9% to just over £3 billion as the company reinvests gains to lower prices, driving volume growth. EPS is expected to rise 15% from 23.4p to 26.9p.

How to trade TSCO results?

Tesco rose to a record high of 398p in mid-February before rebounding lower. The price fell below the 50-week simple moving average (SMA) before finding support on its rising trendline, which dates back to September 2022.

The price closed the week at 340p, the rising trendline, and the November 2024 low. Should buyers rise above this level, a move towards 375 and 398 could be in the cards.

However, should the price face rejection at 340p, a retest of 323p, the riding trendline could be on the cards. Below here, sellers could gain traction towards 300.