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Goldman Crushes Q4, BofA Mixed; Yellen Confirmation Today

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Mark Vickery
·4 min read
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Tuesday, January 19, 2021

With one more full day before the presidential baton is handed off (metaphorically) from President Trump to President-elect Biden, market futures this morning are up: the Dow looks to gain 200 points on the open, with the Nasdaq up 100 points and the S&P 500 +25. Are the bulls returning after a mostly down week? Early signs are yes.

A confirmation hearing is expected today for Biden’s Treasury Secretary nominee Janet Yellen, in which the former Fed Chair (2014-2018, the first-ever woman to hold the post) is expected to answer questions relating to Biden’s proposed $1.9 trillion relief package. In a pre-released quote ahead of Ms Yellen’s hearing, she said, “Without further action, [we can expect] a longer, more painful recession now — and long-term scarring of the economy later.”

That’s pretty cut and dried. The woman who oversaw Fed policy for four years, including factoring the importance of debt and deficits on the U.S. economy, is undisputedly in favor of more spending now. “In the long run, I believe the benefits will far outweigh the costs.” The ideas behind the stimulus package are to alleviate suffering in struggling households, giving economic spending on the consumer side a strong boost and assign capital outlays for a more immediate and successful Covid-19 vaccine rollout.

Big banks continue the parade of Q4 earnings estimates this morning: Zacks Rank #3 (Hold)-rated Bank of America BAC and Zacks #1 Rank (Strong Buy)-rated Goldman Sachs GS both put up beats on their bottom lines, while revenue streams provided slightly different results. Both companies, however, carry Value-Growth-Momentum scores of F, at least prior to this morning’s earnings releases.

Bank of America reported 59 cents per share, amounting to a 3-cent beat over the Zacks consensus (though still down 21% from the year-ago earnings figure). Revenues for the quarter came in a tad light of the $20.4 billion expected to $20.1 billion. Equity underwriting fees popped 141% year over year, while Advisory fees rose 5% for the quarter. Shares of the Charlotte, NC-based big bank are down nearly 2% in the pre-market. For more on BAC’s earnings, click here.

Goldman Sachs, on the other hand, blew the doors off both top and bottom lines in its Q4 report: $12.08 per share was in another orbit from the expected $6.99 per share, while revenues of $11.5 billion topped the $9.65 billion our analysts were looking for. Asset Management grew much larger than expected, to $3.20 billion from $2.20 billion consensus. Trading revenues grew 23% year over year. This marks the fourth straight bottom-line beat for Goldman Sachs, and the stock is up 2% in the pre-market. For more on GS' earnings, click here.

After today’s closing bell, we await Q4 results from Netflix NFLX. The Zacks Rank #3-rated streaming giant is expected to fetch $1.38 per share in the quarter on $6.62 billion in quarterly sales. The company has missed earnings estimates in three straight quarters, though the year-ago quarter posted a positive surprise of 150%. It will be the first of the “FAANG stocks” to report earnings for this cycle.

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