Summary:
- US corporate earnings season begins
- JP Morgan and Citi beat on EPS but Wells Fargo disappoints
- US500 back at key swing level around 2805-2810
The second quarter earnings season begins today, with all the S&P500 companies due to announce their latest trading results in the not too distant future. The focus at the start falls on banks with 3 heavyweights all reporting ahead of this afternoon’s opening bell; JP Morgan, Citigroup and Wells Fargo.
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Create account Try a demo Download mobile app Download mobile appJP Morgan
The first of the three big banks to post, JP Morgan announced record Q2 results with EPS (earnings per share) coming in at $2.29 vs analyst estimates of $2.22. The beat was driven by pleasing gains across most of the firm’s lines of business with higher interest rates having a clear positive impact on margins. Revenue rose by 8% from the same period last year, to come in at $27.8B. The stock jumped higher in pre-market trade but has since fallen back somewhat and is now called to open not far from wher eit ended Thursday.
JP Morgan has been puling back in a falling wedge for much of the year after some strong gains in the second half of 2018 saw price make a high above 119. The recent lows at 102.10 coincide with the prior breakout level and a fall below there would be a clear negative development. Source: xStation
Citigroup
There was also good news for shareholders in Citigroup as far as the bottom line is concerned, with the firm posting EPS of $1.63 vs a consensus forecast of $1.56. There was however, some disappointment in the revenue figure, with a print of $18.47 below the $18.51 expected by analysts. The bank beat on both EPS and revenue in Q1 and compared to that release, today’s is a little more mixed. Shares are called to open lower by around 1% in reaction to the release.
The chart for Citi is similar to that of JP Morgan with a clear falling channel seeing price move lower so far this year. 65.05 represents the prior breakout level for this market, which has held already once, and may be seen as key support. Source: xStation
Wells Fargo
Last, and unfortunately least pleasing as far as shareholders are concerned is Wells Fargo who failed to beat the street on both the top and bottom line. EPS of $0.98 were well below the $1.12 consensus forecast, although it should be pointed out that it remains unclear whether the forecast made provision for a $0.10 per share tax expense. Revenue was also lower, coming in at $21.6B vs $21.7B expected and the latest update appears to serve up further disappointment for a bank that’s been under pressure for several quarters because of multiple probes into its sales practices. There’s been some notable selling in pre-market trade with the stock called to open lower by more than 2.5%.
Wells Fargo has actually been enjoying a good run higher in recent months, although the bank has underperformed its peers since the US election. Note the large gap lower when the false accounts scandal was revealed at the start of the year. Source: xStation
The broader market is at a intriguing level ahead of the weekend, with US indices enjoying a solid week of gains. The US100 has been the standout performer, breaking above its previous all-time high of 7357 to post a new record peak of 7413. The forthcoming US session could prove pivotal for the US500, which has looked to break higher but found some resistance around previous swing highs. The more recent peak was breached during the Asian session but the market has failed to hold onto these gains and the day’s high of 2807 could now be seen to be crucial. If it holds and price ends with an inverted hammer then a possible reversal could lie in store, whereas a decisive push above 2807 would pave the way for a larger breakout which could see a move back near 2878 lie ahead should it occur.
2807 is a potentially crucial level to watch in the US500 heading into the weekend. A break above there would pave the way for a sustained push back to 2878 whereas a failure here could see the recent range remain intact. Source: xStation
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