Earnings Season

Stocks Fell as Dull Earnings Reports from Citigroup and Goldman Sachs Surfaced

Stocks Fell as Dull Earnings Reports from Citigroup and Goldman Sachs Surfaced

Stocks Fell as Dull Earnings Reports from Citigroup and Goldman Sachs Surfaced

On April 15th the stock market closed marginally below previous levels after investors took in both Goldman Sachs’ and Citigroup’s pessimistic quarterly earnings figures.

The S&P 500 and Nasdaq Composite both dropped by 0.1 percent with the Dow Jones also dropping to 26,384.77.

Goldman Sachs’ profit figures were just under investor expectations after sales from the institutional client’s department fell by nearly 20 percent. Shares in the bank plummeted by nearly 4 percent, seeing the largest single-day drop since December 2018.

On the other hand, the Citigroup earnings beat analyst predictions after it bought back over four billion USD worth of stock. Investors were frustrated after a steep drop in the equity trading division led to a 2 percent dip in the bank’s dividends. Shares in Citigroup saw a slump of 0.1 percent.

J.P. Morgan Chase and Wells Fargo issued their earnings report on the 12th of April followed closely by Goldman Sachs and Citigroup’s earnings report on the 15th of April. Regardless of the mixed outcomes from the corporate banks, the earnings season has started positively.

John Butters, the Senior Earnings Analyst for FactSet, said the following for the earnings reports for JPMorgan and Wells Fargo:  

“The Financials (+9.5%) sector is reporting the largest positive (aggregate) difference between actual earnings and estimated earnings. Within this sector, JPMorgan Chase ($2.65 vs. $2.35) and Wells Fargo ($1.20 vs, $1.11) have reported the largest positive EPS surprises. Revenue Surprise Percentage (+0.7%) is below 5-Year Average.”

“In aggregate, companies are reporting revenues that are 0.7% above expectations. This surprise percentage is below the 1-year (+1.4%) average and below the 5-year (+0.8%) average.”

“The Financials (+3.4%) sector is reporting the largest positive (aggregate) difference between actual revenues and estimated revenues. Within this sector, JPMorgan Chase ($29.85 billion vs. $28.44 billion) and Wells Fargo ($21.61 billion vs, $20.99 billion) have reported the largest positive revenue surprises.”

“Decrease in Blended Earnings Decline This Week Due to Financials”

“The blended (year-over-year) earnings decline for the first quarter is -4.3% today, which is smaller than the earnings decline of -4.5% last week. Positive earnings surprises reported by companies in the Financials sector were mainly responsible for the slight decrease in the overall earnings decline during the week. In the Financials sector, the positive EPS surprises reported by JPMorgan Chase ($2.65 vs. $2.35) and Wells Fargo ($1.20 vs, $1.11) were the largest contributors to the overall decrease in the earnings decline for the index during the week. As a result, the blended earnings decline for the Financials sector fell to -2.1% from -4.2% over this period.”

“Increase in Blended Revenue Growth This Week Due to Financials and Energy”

“The blended (year-over-year) revenue growth rate for the first quarter is 4.8% today, which is slightly above the revenue growth rate of 4.6% last week. Positive revenue surprises reported by companies in the Financials sector and upward revisions to revenue estimates for companies in the Energy sector were mainly responsible for the small increase in the overall revenue growth rate during the week.”

“In the Financials sector, the positive revenue surprises reported by JPMorgan Chase ($29.85 billion vs. $28.44 billion) and Wells Fargo ($21.61 billion vs, $20.99 billion) were significant contributors to the overall increase in the revenue growth rate for the index during the week. As a result, the blended revenue growth rate for the Financials sector improved to 5.4% from 4.8% over this period.”

To read the full report click here.

As reported by FactSet, 85 percent of companies that gave earnings reports have surpassed investor earnings forecasts. M&T Bank and Charles Schwab are two other major banks that published quarterly earnings reports on the 15th of April.

Steven Mnuchin, the US Treasury Secretary, on the hot topic of the US-China trade negotiations said:

“We’re hopeful that we’re getting close to the final round of concluding issues,” […] “There are certain commitments that the United States is making in this agreement and there are certain commitments that China is making, and I would expect that the enforcement agreement works in both directions,” he said. “We expect to honor our commitments and if we don’t, there should be certain repercussions, and the same way in the other direction.”   

Taken from The New York Times.  

US Treasury Secretary indicates that trade negotiations between China and the US are approaching an end.

On the 13th of April, Steven Mnuchin said that a trade compromise between China and the US was likely coming to a conclusion, something that would shake up their trade relationship.  An agreement would see an end to the hefty tariffs on billions worth of Chinese and American goods and products. The trade war has impacted both businesses and the world’s economy because of the uncertainty that surrounds the dispute.

The US Trade Representative, Robert E. Lighthizer, on the 27th of February said this about the US-China trade war:

What the President wants is an agreement that is enforceable but that changes the pattern of practice of forced technology transfer, intellectual property protection, large industrial policy subsidies, and then a whole variety of specific impediments to trade and unfair practices in the area of agriculture and services. What we want is fair trade that requires structural change and it has to be enforceable.”

Watch the full clip here.  

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