|Day's Range||3.7900 - 4.2500|
The banking industry hopes to lean on its investment banking and cost-cutting efforts in an otherwise ugly second quarter.
An upbeat second-quarter report by PepsiCo Inc lifted Wall Street early on Monday, but the S&P 500 and Nasdaq ended the session lower on new coronavirus restrictions in California and a resurgence in U.S.-China tensions. Investors are now bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data. JPMorgan Chase & Co and Citigroup Inc, which have substantial lending businesses, could see a sharp plunge in net income in the April-June quarter that witnessed the biggest blow to businesses activity.
U.S. stock index futures rose on Tuesday as investors geared up for quarterly earnings reports from the big U.S. banks to provide clues on corporate America's expectations for the pace of an economic recovery in the second half of the year. JPMorgan Chase & Co and Citigroup Inc, which have substantial lending businesses, could see a sharp plunge in net income in the April-June quarter that witnessed the biggest blow to businesses activity. JPMorgan and Citi shares edged higher in premarket trading, while Wells Fargo & Co, which is expected to swing to a loss, was flat.
(Bloomberg) -- Trading ideas are stacking up for what’s set to be a difficult second-quarter earnings season featuring a wide variation in performance due to the coronavirus pandemic.Stocks have surged from March’s lows despite the bleakest profit outlook since the global financial crisis, with S&P 500 earnings expected to drop about 44%. Megacap technology firms led the stimulus-fueled rally and a key debate is whether they will keep that role as the earnings picture becomes clearer.“For all but a fortunate few -- notably among the FAANGs -- the earnings numbers will be abysmal,” Tan Kai Xian, a statistician and U.S. analyst at Gavekal Research, wrote in a note, using a common acronym for big tech stocks. But there’s a “reasonable prospect” of brighter estimates and positive second-half surprises, which would support stock prices, he said.Here’s a rundown of some recent thinking going into the earnings season:Performance ReversalJulian Emanuel, head of equity and derivatives strategy at BTIG LLC, raises the prospect of leaders and laggards swapping roles, after stocks such as eBay Inc. and Amazon.com Inc. rallied 20% or more from a June 8 peak in the S&P 500, while companies like JPMorgan Chase & Co. and General Motors Co. fell more than 10% over the period.“We view earnings season as a potential catalyst for performance reversion,” he wrote in a note, while also adding that “if 2020 has taught us anything, it is that anything can happen -- and probably will.”Tech Risk?Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, flags the possibility that disappointing earnings and guidance from technology companies may be an “underappreciated” risk. Investors should consider adding gold, corporate credit and non-U.S. stocks to portfolios that are overweight the S&P 500, she wrote in a note.OptionsAmy Wu Silverman, derivatives strategist at RBC Capital Markets, sees an opportunity for investors to use the current high premiums in call options in their favor. Specifically, she recommends call spreads on Amazon and Netflix Inc. -- a strategy that involves both buying and selling the bullish options but with different strike prices -- as a way to profit from further modest gains in their stock prices.Long FinancialsEvercore ISI strategists led by Dennis DeBusschere have recommended going long financials into the earnings season because “there’s upside potential for a battered-down sector that’s priced in negative headlines already.”IndustrialsStuart Kaiser, head of equity derivatives research at UBS Securities LLC, recommends call options on the Industrial Select Sector SPDR Fund to position for upside in earnings, as the firm’s “big data” analysis shows revenue for industrials above consensus heading into the reporting season.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Global stocks slipped on Tuesday, oil sagged and a safety bid supported the dollar as simmering Sino-U.S. tensions and new coronavirus restrictions in California kept a lid on investor optimism with earnings season getting underway. The pan-European STOXX 600 opened 1.5% lower and was heading for its worst day in 14 sessions after technology stocks dropped 3.4%. The moves followed a selloff on Wall Street after California Governor Gavin Newsom ordered bars closed and restaurants and movie theatres to cease indoor operations.
Asian stock markets slipped on Tuesday, oil sagged and a safety bid supported the dollar as simmering Sino-U.S. tensions and fresh coronavirus restrictions in California kept a lid on investor optimism as earnings season gets underway. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2%. Japan's Nikkei retreated from a one-month high touched on Monday, dropping 0.9%, while Chinese stocks were down despite better-than-expected trade numbers.
Asian stock markets slipped on Tuesday, oil sagged and a safety bid supported the dollar as simmering Sino-U.S. tensions and fresh coronavirus restrictions in California kept a lid on investor optimism as earnings season gets underway. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2%. Japan's Nikkei retreated from a one-month high touched on Monday, dropping 0.8%.
The dollar edged lower on Monday as investors looked to U.S. corporate earnings and upcoming retail data to gauge whether guarded optimism on the economic outlook was justified. The index that measures the safe-haven dollar against a basket of six other major currencies pared early losses to end the session just 0.07% lower at 96.538. The dollar ended its third week of losses on Friday as investors bought into risk-sensitive currencies on bets that the worst of the pandemic's sweeping impact was over.
Second quarter earnings for 2020 are expected to show some of the steepest declines in decades, but strategists say the worst may be behind us.
As JPMorgan Chase gears up for earnings, will bulls retain control? Considered by many to be the highest-quality name in its sector, JPMorgan will look to set the tone when it reports its second-quarter results on Tuesday before the market opens. The bank will be joined by other companies reporting earnings before the open, including Wells Fargo , Citigroup and Delta Air Lines , among others.
JPMorgan Chase (JPM) reports Q2 earnings on July 14. Can the bank reverse its declining earning and net interest margin?
There are some people almost everyone in the market stops and listens to--for instance, Warren Buffett (the so-called "Oracle of Omaha.") Then of course there's Fed Chairman Jerome Powell. Another one? Jamie Dimon, CEO of JPMorgan Chase & Co. (NYSE: JPM).Tomorrow, Dimon gets his turn in the spotlight, and many investors likely will tune in. He's expected to deliver his latest views of the economy and the effect of the crisis on banks and other industries as JPM reports Q2 earnings. Sometimes, Dimon's words can move the market, so there's potentially money riding on whether he sounds sunny or concerned about the economy and his industry.Dimon is generally thought of as an optimist when it comes to long-term U.S. economic prospects. However, he wasn't exactly pounding the table about a possible "V-shaped" recovery on the company's Q1 call. The big banking sector, including JPM, has been remarkably profitable in spite of challenges even before COVID-19, but the industry's ability to grow earnings could continue to be challenged by low-interest rates and high U.S. unemployment, according to research firm Briefing.com.While no sector is immune to the virus, few arguably have as much exposure as Financials. That was reflected in Q1 when most of the big banks took large provisions for credit losses, hurting their profitability. The overriding question heading into this earnings season is whether the banks add substantially to those provisions or start slicing them a bit. Their action could say a lot about how they see the reopening taking shape. Even if these provisions ease in Q2, they're likely to continue to weigh on banks' profitability.The banking sector is definitely feeling the heat, and analysts' expectations are low going in. Earnings for banks in the S&P 500 are expected to fall a cumulative 48.3% in Q2, ahead of only four other sectors, according to research firm CFRA.JPM is just one of the major U.S. banks reporting Q2 earnings tomorrow morning. Results from Wells Fargo & Co (NYSE: WFC) and Citigroup Inc (NYSE: C) also are due to hit the wires. Analysts expect C and JPM to remain profitable in Q2, but project a slight loss for WFC (see more below).JP Morgan And Credit Loss Provisions We don't know yet what Dimon might say. Still, things to listen for include his take on the better economic data seen lately, the need for expansion or cutting back credit provisions, the general health of the corporations JPM deals with, the lending environment, and the impact on banks' net interest income from these all-time low interest rates.Recently, Dimon was quoted in Barron's calling the aggressive action taken by the Federal Reserve and U.S. Treasury, "the right thing to do." He also said the return to rock-bottom interest rates will be manageable: "It changes the profitability of deposits, but my view is you run the business fundamentally the same way."Judging by some of Dimon's recent public statements, it seems likely JPM will take the same provisions for credit loss in Q2 as in Q1, but we'll find out for sure on Tuesday.FIGURE 1: CAN'T KEEP UP! The Financials sector (IXM--candlestick) tracked here over the last three months vs. the S&P 500 Index (SPX--purple line) got a nice lift in late May/early June as investors began gravitating toward "value" stocks, but then took another leg lower later in June as economic worries and low rates persisted. Data Source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.Weak Net Interest Margin Likely Anticipated The drop to zero rates hit Financials hard in the first half, most likely eating into their profitability. However, the numbers in Q2 might get brushed aside a bit by investors, who go in well aware that the banks faced major challenges as far as net interest margin during the quarter.Arguably, that's built into the stock prices of firms like JPM, which have languished pretty visibly even as much of the market rallied fiercely from the late-Q1 lows. JPM shares, which rose briefly above $100 in early June, have fallen back toward the $90 level. By last week, JPM shares traded near $92, about 16% above the March 23 low. However, the S&P 500 Index (SPX) has risen more than 40% since then.In this sense, JPM and the other big banks--whose stocks have also generally languished--seem to be playing in the same ballpark as Treasury yields--which have remained stubbornly low despite the stronger economic data and rising stock market.While much of the market has rallied based on the hope that reopening will bring bigger and better things, banks don't seem to be joining in with that idea. That could be a reflection of the tie-in to the Treasury market and a view among many veteran traders that despite this recovery from the shutdown phase, a lot of structural damage has been done to the economy that could take time to work through, Briefing.com noted.Also, big banks can't retreat to lick their own wounds during a crisis. Every other sector's problems quickly become theirs as consumer lending, corporate borrowing, investment banking, and other financial activity all take a hit. For instance, any bank that has travel or department store companies among its big customers probably suffered right along with those downtrodden sectors earlier this year. Any insight from bank executives about the possible recovery of these sectors amid recent reopenings could be illuminating.Green Shoot Barometer At Citigroup? Of all the big banks, Citigroup might have taken some of the worst March and April punishment, partly because it has a massive credit card business.However, Q2 was kind of the polar opposite of Q1, which means C and its credit card business could be a decent barometer for measuring how strong the reopening sentiment has been among consumers. Remember, January and February were pretty normal months before things collapsed in March. Conversely, in Q2, April and May were mostly washed out by the virus, while June saw some signs of a turnaround.While in Q2 we saw the full effects of the shutdown, we also saw some green shoots. Retail sales really perked up in May, and recent ISM manufacturing and services reports for June showed signs of expansion in the economy. It could be interesting to hear what C executives have to say about this and whether it thinks consumers are better situated now.We've also had a couple of strong monthly employment reports in May and June. This is possibly a good sign for big banks not only from the aspect of consumers beginning to spend and take loans, but also for business spending and borrowing. However, keep in mind that weekly new jobless claims remain well above 1 million, and that's really the leading indicator.Citigroup also has been expanding its investment banking business, but investment banking last quarter and in the coming quarters probably faces huge challenges. Few companies necessarily want to risk an initial public offering at times like these. That said, there has been a little bit of a pickup in the IPO situation recently, along with some merger and acquisition (M&A) news. This could be a good sign for the entire big bank sector providing it continues into Q3. The rising caseload and signs of new shutdowns in parts of the country remain a big question mark, though.The other positive for C and other big commercial banks like JPM and Goldman Sachs Group Inc (NYSE: GS)--which reports later this week--is potentially solid returns from the trading business. There's been tremendous trading volume in the stock market, and plenty of activity in the Treasury market as well. This tends to help bottom lines and could be another "silver lining" for some of the banks, Briefing.com said.Wells Fargo And The Yin And Yang Of Low Rates When long-term yields decline, that can weigh on mortgage rates, among other bank offerings. Sure enough, 30-year mortgage rates just haven't been budging. They recently averaged 3.24%, according to Bankrate. That's down from 3.5% a month ago.This is especially tough for WFC, which has the biggest mortgage origination business of any of the three banks we're talking about here. Last year, WFC's CFO called mortgage lending the "core" of the company's business.Things probably were toughest for mortgage lenders in March and April, when most of the economy was shut down and people were cooped at home. The economy opened up again starting in May, accelerating in June. That's helped many Realtors get back to having open houses. Also, the low rates have seemed to gin up more interest from home buyers. Existing home sales data over the last two months showed a bit more life, though they remained on the defensive. Meanwhile, new home sales rose sharply in May.There was pretty good mortgage activity in the latter half of Q2, with mortgage applications picking up steam. On the downside for WFC and other mortgage lenders, there's also been a significant number of extension requests for mortgage forbearance beyond the government's initial three-month extension. Borrowers are requesting additional leeway, which is something to potentially keep an eye on when WFC reports.Regional banks are also big mortgage generators, so perhaps keep an eye on those when they start reporting. Strength or weakness among regional banks can often be reflected by the Russell 2000 Index (INDEXRUSSELL:RUT) index of small-cap companies, where regional banks have a large presence.Setting The Tone For Earnings To Come Typically, bank earnings coming early in the season help set the tone for the rest of the reporting period. This is definitely the case more than ever this time as investors want to hear straight from JPM's Dimon and others about where they see the economy going as the U.S. and world economy continue to grapple with the crisis and manage reopenings.There's still concern about credit quality and credit risk. The full extent of that wasn't clear when banks reported Q1 results in mid-April, but by now bank leaders likely have far more perspective, which they'll hopefully share with investors. The bank leaders' views on this could tell investors what to expect when the bulk of companies across all sectors start pumping out their own earnings later this week and beyond.JPMorgan Chase Earnings And Options Activity When JPMorgan Chase releases results, it is expected to report adjusted EPS of $1.19, vs. $2.82 in the prior-year quarter, on revenue of $30.29 billion, according to third-party consensus analyst estimates. Revenue is expected to be up 2.5% year-over-year. Options traders have priced in about a 5.3% stock move in either direction around the upcoming earnings release, according to the Market Maker Move indicator on the thinkorswim® platform from TD Ameritrade. Implied volatility was at the 30th percentile as of Monday morning. Looking at the July 17 options expiration, puts have seen some activity at the 85 and 90 strikes, but the biggest concentrations have been on the call side, led by the 100 strike, followed by the 110 strike. Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.Wells Fargo Earnings And Options Activity Wells Fargo is expected to report adjusted loss of $0.11, vs. $$1.30 in the prior-year quarter, according to third-party consensus analyst estimates. Revenue is expected to be $18.4 billion, down 15% year-over-year.Options traders have priced in a 7.5% stock move in either direction around the coming earnings release, according to the Market Maker Move indicator. Implied volatility was at the 42nd percentile as of Monday morning. For the July 17 expiration, there's been some put activity at the 22.5 and 25 strikes, but calls have been quite active at the call activity has been highest at the 27.5 and 30 strikes.Citigroup Earnings And Options Activity Citigroup is expected to report adjusted EPS of $0.30 vs. $1.95 in the prior-year quarter, on revenue of $19.11 billion, according to third-party consensus analyst estimates. Revenue is expected to be up 1.9% year-over-year.Options traders have priced in a 5.2% stock move in either direction around the coming earnings release, according to the Market Maker Move indicator. Implied volatility was at the 28th percentile as of Monday morning.Call activity for C has been highest at the 55 and 60 strikes, while puts have seen activity at the 45 and 50 strikes.TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options .Photo by Erol Ahmed on UnsplashSee more from Benzinga * Will Banks Vault? Earnings Season Likely To Disappoint, But Investors Hope To Hear 2021 Optimism * Travel Industry Earnings Preview: Preparing For A Big Drop * Financial Stocks Could Be In Focus as Yields Fall Ahead of Reports From Big Banks(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Uncertain economic times, however, have also meant that the larger universal banks have been able to benefit from increased trading and underwriting activity. For this reason, analysts at RBC Capital Markets suggest buying (JPM) (ticker: JPM) and (MS) (MS) ahead of earnings, figuring that both will beat expectations. “We would be a buyer today of JPM and MS in anticipation of these two companies showing the best outperformance relative to expectations,” Gerard Cassidy, analyst at RBC Capital Markets, said in a note Monday.
The U.S. dollar edged lower on Monday as investors looked to domestic corporate earnings and upcoming retail data to gauge whether guarded optimism on the country's economic outlook is justified. The index that measures the dollar against a basket of six other major currencies - which often serves as a safe-haven for investors seeking high-quality assets in moments of market volatility - was down 0.31% in North American morning trade. The dollar ended its third week of losses on Friday as investors bought into risk-sensitive currencies on bets that the worst of the pandemic's sweeping impact was over.
Bank investors have surely felt like they are trudging through a disaster zone this year. The sector sold off aggressively as investors tried to assess the damage from the first- and second-order effects of the coronavirus. “The upcoming 2Q20 results will be confusing, sloppy, and shocking for some banks, in our view, but our outlook is cautiously optimistic as we expect the economy to continue to gain momentum into the end of the year,” Gerard Cassidy, analyst at RBC Capital Markets, said in a note Tuesday.
JPMorgan Chase (JPM) is seeing favorable earnings estimate revision activity and has a positive Zacks Earnings ESP heading into earnings season.
Coronavirus remains unchecked, but the Nasdaq is aiming for another all-time high. Is earnings season taking priority?
Earnings seasons starts with big banks and NFLX, while multiple central banks make interest rate decisions. China also announces Q2 GDP numbers.
Emerging market risk assets started the week on a strong footing on Monday, with investors turning their focus towards the beginning of the U.S. corporate earnings season, while Poland's zloty edged higher after Andrzej Duda won the country's presidential election. "I expect that trading revenues will outperform once again as market volatility continues," said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
Market participants are bracing for the start of what will likely be the weakest corporate earnings season since the global financial crisis, as the coronavirus pandemic and measures to contain it hit business activity especially hard in the second quarter.
NEW YORK, NY / ACCESSWIRE / July 14, 2020 / JPMorgan Chase & Co. (NYSE:JPM) will be discussing their earnings results in their 2020 Second Quarter Earnings call to be held on July 14, 2020 at 8:30 AM Eastern ...
On Tuesday, three of the largest banks in the U.S. — JPMorgan Chase, Wells Fargo and Citi — kick off earnings season when they report their quarterly results. Moody’s Jeffrey Berg expects financials to report “varied, and in some instances, sharp declines in earnings” due to coronavirus and collapsing oil prices. Berg joins The Final Round to discuss what factors he’s focused on beyond the headline numbers.