Earnings Season Is Here

Earnings Season Is Here

Investors turn their attention to major U.S. companies that will report earnings this week. JP Morgan, Citigroup, and Wells Fargo are first to set the scene and give insights on how major companies are coping with the pandemic. 

Financial firms take center stage this week. JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Bank of America (BAC), and BlackRock (BLK) are just a few of the big banks and asset managers that will post their latest results.

Banks will not be the only companies in the earnings spotlight.  Delta, Netflix, and Dow components Johnson & Johnson (JNJ) and UnitedHealth (UNH) are also due to report their latest results.

According to estimates compiled by FactSet, the S&P 500 is expected to report a decline of 44.6% for the second quarter. Assuming the aggregate earnings beat forecasts by 5%, the index will still end with a 39.6% fall in profits. Even the most optimistic scenario will show the largest year-on-year decline in earnings since the Great Financial Crisis.

Tech company earnings are only expected to fall by 8%. The worst sectors are expected to be energy, with a decline of 154%, followed by consumer discretionary, expected to be down by 114%, according to Refinitiv.

“U.S. companies are about to give us a look into their worst quarter since the Great Financial Crisis,” said Lindsey Bell, chief investment strategist at Ally Invest. “But since so many companies aren’t giving earnings forecasts, investors won’t make moves based on earnings alone. They’ll also be looking at trends since the quarter ended. Increasing coronavirus cases, management outlooks, and price performance could all have an outsized impact, and that could lead to outsized market moves.”

In the week ahead, three G10 central banks will announce policy– the BoJ (Wednesday), BoC (Wednesday) and ECB (Thursday) which marks the week’s most prominent event. On the data front, there are some important economic reports including; US CPI inflation data on Tuesday and retail sales on Thursday. Last month, retail sales jumped 17.7% from April to May, but this month economists are watching closely to see if the delay of some openings is impacting consumer spending. Outside the macro data, the focus will be on the start of the US earnings season.

Up Next:

Tuesday: US inflation data; UK balance of trade; Germany economic sentiment; Citigroup (C), Delta Air Lines (DAL), JPMorgan Chase (JPM) and Wells Fargo (WFC) earnings

Wednesday: US industrial production; Goldman Sachs (GS) and UnitedHealth (UNH) earnings

Thursday: China GDP; US initial unemployment claims and retail sales; Bank of America (BAC), Charles Schwab (SCHW), Honeywell (HON), Johnson & Johnson (JNJ), Morgan Stanley (MS), Truist (TFC) and Netflix (NFLX) earnings.

Friday: US housing starts and building permits; BlackRock (BLK) earnings

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