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Things are never as bad as they seem.
Despite analyst warnings, Q3 results come in above expectations:
- S. Bancorp posted a profit of $1.81 billion, or $1.16 a share, whereas analysts polled by FactSet had been expecting earnings of $1.14 a share.
- JPMorgan Chase earnings reached $3.12 a share, beating the $2.88 estimate of analysts surveyed by Refinitiv. Revenue also exceeded expectations: $33.49 billion vs the $32.1 billion estimate.
- Bank of America pleased investors with profit and revenue exceeding expectations on better-than-expected fixed-income trading and gains in interest income.
Despite the strong start to earnings season, U.S. indices ended the week in negative territory with the volatility index returning to levels above the 32 mark, and U.S. 10-year yields rebounding 1.47%. The key support level for S&P 500 appears to be 3,600. Unless it is broken, going short seems a risky bet even though Goldman Sachs & Co forecast further deterioration of the sentiment.
For further clues in terms of the Fed’s intention, investors will look to Fed speeches. For instance, Chicago Fed President Charles Evan, Minneapolis Fed President Neil Kashkari, and St. Louis Fed President James Bullard will speak on Wednesday. It is worth noting that the Beige Book will be released on the same day. As of now, a dovish switch is not expected.
One more topic to follow is the U.S. Treasury’s proposal to purchase government bonds from large banks to increase market liquidity. According to Reuters, the Treasury is asking dealers about the specifics of how buybacks could work “in order to assess better the merits and limitations of implementing a buyback program.” Another round of QE could trigger another rally in the market.
As for the earnings season, Netflix, Inc, Johnson & Johnson, United Airlines Holdings, Inc, The Bank of New York Mellon Corporation, American Airlines Group Inc, International Business Machines Corporation, and Verizon Communications Inc. will release reports this week. Overall, Goldman Sachs analysts expect earnings per share for S&P 500 companies’ margins to decline 75 basis points to 11.8%.
