Good morning investors,
Bank of America beats with 98 cents EPS versus 96 cents expected as net interest income surges 9.7% to $15.92 billion, while Wells Fargo's missed on revenue. Chinese customs blocks Nvidia H200 chips from entering the country while officials explicitly instruct companies not to purchase them, escalating the AI chip war. Bitcoin surges back to $95,000 as $6 billion in whale accumulation and cooling inflation reignite momentum toward $100,000. Mortgage applications explode 28.5% weekly with refinancing up 40% after Trump's $200 billion bond-buying announcement briefly pushed rates below 6%.
Let dive in!
Opening Bell: Banks Diverge
Dow ($DIA ( ▼ 0.53% )) futures down 157 points with S&P ($SPY ( ▼ 0.26% )) and Nasdaq ($QQQ ( ▼ 0.38% )) futures off 0.4% and 0.6% respectively as bank earnings create mixed signals. Bank of America ($BAC ( ▼ 1.11% )) rises 1% premarket on beats while Wells Fargo ($WFC ( ▼ 1.12% )) drops 2% on revenue miss. Citigroup reports shortly.
Yesterday's 400 point Dow decline reflected JPMorgan's 4% tumble on investment banking fee disappointment contagion. The selloff seems overdone given actual results strength, classic shoot first, analyze later market behavior.
Bank of America Delivers
Brian Moynihan's bank posted EPS of 98 cents beating the 96 cents consensus, while posting revenue of $28.53 billion topped $27.94 billion expected. Net interest income jumping 9.7% to $15.92 billion drives the outperformance.
Trading revenue up 10% to $4.5 billion confirms capital markets strength isn't just a JPMorgan phenomenon. The 24% stock gain in 2025 reflects industry tailwinds from Wall Street activity, stable credit, and deregulation continuing into 2026.
Wells Fargo's Mixed Bag
Charlie Scharf delivered adjusted EPS of $1.76 beating $1.66 estimates but revenue at $21.29 billion missed $21.64 billion consensus. Net interest income of $12.33 billion fell short despite 4% growth as the bank struggles with asset cap removal aftermath.
The 2% premarket decline seems harsh given strong credit performance with charge offs down 13% to $1.03 billion. Average loans up 5% and deposits growing 2% show fundamental health despite headline miss.
China Blocks H200 Completely
Chinese customs declaring Nvidia H200 chips prohibited while officials explicitly instruct companies not to purchase them unless necessary marks significant escalation. This contradicts Trump administration's formal approval of China bound H200 sales with restrictions.
The whiplash between U.S. approval requiring third party testing and 50% allocation limits versus China's outright ban creates impossible situation for Nvidia. The $27,000 per chip H200 represents crucial revenue now frozen in geopolitical crossfire.
Bitcoin's Whale Resurgence
BTC climbing back to $95,000 follows massive institutional accumulation: Binance buying 27,371 BTC, Coinbase 22,892 BTC, with total whale purchases near $6 billion. This isn't retail FOMO but serious money positioning for the next leg higher.
Spot Bitcoin ETFs pulling in $700 million weekly while long-term holders reduce selling creates perfect supply/demand dynamics. Strive adding 123 BTC to reach 12,797.9 total, surpassing Tesla's holdings, shows corporate treasury adoption accelerating.
Mortgage Market Explosion
Applications surging 28.5% weekly with refinancing up 40% comes off the back of Trump's unconventional $200 billion Fannie/Freddie bond buying announcement. Rates briefly breaking below 6% Friday before bouncing shows psychological barrier importance.
The average 30 year rate falling to 6.18% from 6.25% may seem small but triggered massive pent-up demand. Purchase applications up 16% weekly and 13% year over year suggest housing market responding to any rate relief.
Inflation Continues Moderating
December CPI at 0.2% monthly and 2.6% core annually came below 62 of 73 economist estimates, confirming disinflation trend. The slowest core growth since March 2021 gives Fed complete flexibility to hold rates steady.
Markets pricing just 5% chance of January rate change reflects consensus that inflation no longer drives policy. The shutdown data complications matter less than directional confirmation of cooling pressures.
Saks Global Bankruptcy Shock
The high end department store conglomerate filing for bankruptcy barely a year after combining Saks Fifth Avenue, Bergdorf Goodman, and Neiman Marcus represents one of the largest retail collapses since the pandemic. The rapid financial deterioration despite premium positioning shows even luxury retail faces existential challenges.
Meta Remains Unloved Opportunity
Meta is has been pulling back since its bounce around Thanksgiving. If the stock is approaching the upper $500s before earnings, it could represent the most attractive Mag 7 play. The persistent negativity despite strong fundamentals creates classic contrarian setup where sentiment lags reality. People normally look at the names in the headlines and then miss the real winners. This was true of my pick for 2025 - Google.
International Versus America
While I see great value in international equities alongside U.S. small caps, I'm not in the "sell America" camp. The best innovation comes from the U.S. and American companies will lead AI development at the top level for years.
The "sell America" trade requires bond yields soaring from lost Fed independence crushing earnings while investors flee to gold. Neither seems likely with Powell's bipartisan support and markets showing concern, not capitulation.
Final Thought
Bank earnings divergence creates opportunity. I think financials will have a strong year in 2026 and the drawdowns on JP Morgan and Wells Fargo, if they continue, could present nice entries for the individual or for the sector as a whole.
China's H200 ban escalates the AI chip war to new levels. Nvidia caught between U.S. restrictions and Chinese prohibition faces impossible situation. This reinforces domestic chip manufacturing importance while highlighting geopolitical risks in semiconductor investing.
Bitcoin's resurgence backed by $6 billion in whale accumulation suggests the consolidation phase ending. The combination of cooling inflation, strong ETF flows, and corporate adoption creates compelling setup for pushing above $100,000. My conviction remains strong.
Today's PPI and retail sales data could confirm the goldilocks scenario, moderate growth with cooling inflation. Markets want validation that economy neither overheating nor collapsing, supporting the Fed pause narrative.
As always, feel free to reach out with questions about positioning.
Best regards,
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.