Wells Fargo stock down 7% despite its quarterly earnings beat

Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments. U.S. stocks advanced Friday as the S & P 500 rebounded from its worst trading session since late April. The benchmark gauge broke its seven-day win streak Thursday as investors rotated out of Big Tech names into smaller-cap stocks, sending many Club holdings down, including Nvidia ‘s 5% drop. Shares of the chipmaker gained more than 2% on Friday. June’s hotter-than-expected producer price index print ran counter to Thursday’s consumer price index (CPI) data that showing inflation easing, but it shouldn’t change rate cut expectations for September. The Dow returned to record territory and topped 40,000 once again. Wells Fargo stock tumbled 7% after the bank’s second-quarter report despite beats on revenue and earnings. The market’s focus is instead on net interest income (NII), which came in worse than expected. Investors wanted to see management improve it full-year forecast FOR NII — a key gauge of the bank’s lending and borrowing activities — but higher funding costs and lower loan balances are weighing on profits. We’re not concerned about the stock’s move lower or the results, however, because Wells Fargo’s push into fee-based businesses like investment banking look promising. Rather, this looks like a sell-the-news event, given that Wells Fargo shares rose into the quarterly print. We’ll have the full Club analysis on results later Friday. Morgan Stanley and Abbott Laboratories will post earnings next week on Tuesday and Thursday, respectively. Capital markets were strong for other bank earnings on Friday, which could serve as a good read-through for Morgan Stanley’s investment banking business. We expect solid results from Abbott Labs as well after the company beat and raised its outlook in the first quarter. However, the ongoing trial regarding Abbott’s premature infant formula remains an overhang for the stock. (Jim Cramer’s Charitable Trust is long WFC, MS, ABT, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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