WSJ What’s News - What’s News in Markets: JPMorgan’s Warning, Medicare Insurers, Chipmaker Rally

Episode Date: September 14, 2024

What warning did JPMorgan give about rate cuts? And why are health insurers taking a hit after the presidential debate? Plus, how much did a big chipmaker rally support stock indexes this week? Host Jack Pitcher discusses the biggest stock moves of the week and the news that drove them. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Non-investment advice. Crypto trading involves risk of loss. See kraken.com, legal slash ca dash pru dash disclaimer for info on kraken's undertaking to register in Canada. Hey, listeners. It's Saturday, September 14th. I'm Jack Pitcher for The Wall Street Journal. And this is What's News in Markets, our look at the biggest stock moves of the week

and the news that drove them. Let's get to it. Stocks were on the rebound this week after a bad start to September. The S&P 500 was back within striking distance. Of the record highs it touched earlier this year, its chipmakers and tech companies rallied hard. But the bond market is flashing warning signs. Bond yields have been dropping fast, with both short and long-term yields

trading near this year's lows. Yields dropping means that prices are going up, and that means traders are shifting their money into ultra-safe government debt, often a sign that investors are nervous. Everyone is looking ahead to next week's Federal Reserve meeting. The central bank is expected to cut rates for the first time since 2020, but Wall Street isn't sure how deep those cuts will be. That plus uncertainty about the economy has been a source of angst for traders recently, fueling market volatility.

Those rate cuts are on everyone's mind, including at JPMorgan Chase. The bank on Tuesday sounded a warning on how lower rates could hurt its earnings, and investors were spooked. JPMorgan has been telling investors for several quarters that the high income it's been generating from interest earned isn't sustainable if the Fed begins to cut. The bank now says the analysts' estimates

for how much interest income will fall next year are too low. JPMorgan shares fell more than 5% Tuesday, one of its worst days in recent years. The bank finished the week down almost 4%, placing it among the S&P 500's worst performers. And then on Tuesday evening was the presidential debate. It sent shares of health insurers UnitedHealth and Humana tumbling the next day. Why was that? Many pundits said Kamala Harris turned in a strong performance, which could give her campaign a boost. But the prospect of a President Harris makes Wall Street analysts less optimistic about the Medicare business.

That's because the Biden administration curtailed certain billing practices, and those billing practices had boosted payouts to Medicare business. That's because the Biden administration curtailed certain billing practices, and those billing practices had boosted payouts to Medicare plans. Shares of UnitedHealth and Humana, the two largest Medicare insurers, tumbled 9% and 18% on Wednesday. Humana was the S&P 500's worst performer this week, shedding 10%.

Perhaps this year's biggest stock market theme, the dominant performance of chipmakers, was back in full force this week. Broadcom, Supermicrocomputer, and Nvidia all rose at least 15% on the week. Investors seemed to be brushing off a disappointing forecast from Broadcom last week that sparked a sector-wide sell-off. And that's welcome news for index fund investors, who are increasingly exposed to AI-related chip stocks like Nvidia. It's now the third highest-weighted stock in the S&P 500.

And now you know what's news in markets this week. Today's show was produced by Trina Menino and Anthony Banzi with supervising producer Tali Arbel. I'm Jack Picher. Have a great weekend, and see you next Saturday.