Financial stocks led the Standard & Poor’s 500 higher on Thursday as the Financial Sector Sector SPDR ETF (XLF) gained 1.75% to beat the 0.83% rise in the S&P 500. Sure felt to me like the sector was anticipating the earnings reports from the big banks due on Friday morning before the market open. Earnings from the financial sector open first quarter earnings season.
On Saturday in my Saturday Night Quarterback look ahead at the week on JubakAM.com I wrote that the week before the start of earnings reporting season–in other words, this week that we’re now in–was likely to see the market bounce from one idea to the next with one day’s worries sinking the market and the next day’s leading to gains. That’s exactly what we saw yesterday
When it arrives, first quarter earnings season is going to be spectacular. At least that’s what Wall Street is now expecting. The consensus analyst estimate points to 16.9% year over year jump in earnings for the first quarter. (According to Wall Street estimates, the story for earnings growth in 2018 only gets better from there with 19.6%, 21.6% and 17.6% year over year earnings growth projected for the second, third, and fourth quarters of 2018, respectively.
So much news. And so much that has the potential to move the financial markets. Let’s start on the economic side, ok? Monday we get reports on personal income and inflation. And on the earnings side? Lots and lots of reports that could change the tone of this market. The biggest are Microsoft, (MSFT), PayPal (PYPL) and Facebook (FB) on Wednesday January 31 and then Alphabet (GOOG), Apple (AAPL) and Amazon (AMZN) on Thursday, February 1.
The Standard & Poor’s 500 stock index broke lower out of the gate on Monday, the first trading session when it could react to Friday’s Senate vote to shutdown the government. The Monday open at 2809.16 was a big 1.14 POINTS (not percent) below the Friday close at 2810.30. You could feel traders shaking in their boots–although maybe that was the rumble from the #2 train passing under the exchange.
The shutdown of the Federal government the occurred as expected on Friday night won’t have much effect on U.S. or global stock markets until it exceeds the 2013 shutdown in duration. That shutdown lasted from October 1 to October 17. Each week of the shutdown shaves 0.1% to 0.2% off the GDP growth rate, according to calculations from Standard & Poor’s. And in past shutdowns the economy has quickly recouped that loss GDP once the government has gone back into operation .Judging from history the stock market doesn’t like a shutdown but it doesn’t ‘t see it as a big deal. Could it be different this time? Sure.
Yes, it’s time for the 36th Annual J.P. Morgan Healthcare Conference in San Francisco–Monday thorough Thursday. Everybody who’s anybody will be presenting and the conference will help set expectations for 2018 in biotechnology after the sector’s huge year in 2017.
We are likely to see a test of this rally as we begin earnings season. The first earnings reports that might move the market come at the end of the week on Friday, January 12. But you can expect some nervous anticipation as we move toward Friday. That’s because the first potentially market-moving reports come this quarter, as has been the case for a while now, from the financial sector.
Enough changes in direction this week in earnings reports to keep your head spinning. We go from earnings results from the “old economy” to tech behemoths to Big Oil. This week starts off with a truckload of earnings reports from bellwethers of the “old economy.”
Earnings season heads for serious territory this week with reports from Citigroup (C) and JPMorgan (JPM) before the market open on Thursday October 12, and from Wells Fargo (WFC) and Bank of America (BAC) before the market open on Friday October 13. Bank earnings are especially important because the financial sector has been the key support for the continued rally in stocks over the last month
More big bank earnings today–and, fortunately, they were a mixed bag. Which made them markedly better than Friday’s results. Bank of America’s (BAC) ‘s second-quarter earnings per share rose 12% to 46 cents, beating by 3 cents a share. Revenue climbed 7% to $22.8 billion against the Wall Street consensus of $21.915 billion. Shares of Bank of America closed up 0.5% today, July 18.
