This Week on Wall Street, Bank Earnings in the Headlights
$JPM, $GS, $MS, $BAC, $DB, $USB
Banks are definitely in the headlights this earnings season, and there is caution in the market, Q-2 was not strong economical.
Financials have been the worst performing of the 10 major S&P 500 sector groups this year, down nearly 6%, as they were hit by reduced expectations for a US interest rate hike by the Fed and uncertainty in the wake of the vote by Britain to leave the EU.
Q-2 earnings overall are expected to decline 4.7%, according to Thomson Reuters data, the 4th straight Quarter of negative earnings, but up slightly from the 5% decline in Q-1.
Investors will be looking for confirmation this quarter that earnings are starting to turn, with analysts anticipating a return to growth in 2-H of the year, starting with expectations for a 1.8% increase in Q-3.
That 2-H pickup could translate into some better earnings outlooks. The current PE/R (price-to-earnings ratio) for the S&P 500 is an elevated 18.2X and an increase in profits would make stocks cheaper.
Other notable earnings reporting this week include Alcoa Inc (NYSE:AA), Yum! Brands (NYSE:YUM), Delta Air Lines (NYSE:DAL) and CSX Corp (NYSE:CSX).
The end of the week will give investors some insight on the health of the consumer, manufacturing and inflation with monthly retail sales, the consumer and producer price indexes, the Empire State manufacturing survey and a preliminary reading on consumer sentiment.
Yet even with stocks tapping up a record high, some investors remain cautious in light of uncertainty about the Fed’s plan for rates, upcoming US elections and potential ripple effects as the UK begins to move forward with its exit from the EU.
There are many things that can go wrong over the next couple of months.
Have a terrific week.