Monday, April 14, 2014
Stocks appear on track to start today's session on a positive
note after last week's anxiety inducing sell-off, with this
morning's positive earnings and economic data also helping the
mood. A lot is riding on the Q1 earnings season which ramps up
this week, with more than 50 S&P 500 members announcing
The strong Citigroup (
) earnings report helps improve the sour mood created by Friday's
) report. The capital markets weakness that restricted J.P.
Morgan's results was present in the Citi results as well and will
most likely show up in the
Bank of America
) reports later this week as well. The mortgage weakness has been
well known as well. But better expense management and likely
lower expectations benefited Citi, as did better-looking
performance on the loans front.
That said, overall Finance sector earnings are expected to
decline this quarter after many quarters of double-digit gains,
though Citi's results show that the picture is likely somewhat
better than the downbeat growth numbers would suggest.
Beyond Finance, we have a number of notable bellwethers from
other sectors reporting results this week as well, including
). Results from these companies will give us a good sense of how
to view the emerging earnings backdrop. This is important because
while the not much growth momentum is expected to emerge from the
Q1 earnings season, hopes for the coming quarters remain high,
with growth expected to ramp up in the back half of the year and
continue into 2015.
Investors have been hoping for an earnings rebound for quite some
time, but the turnaround keeps getting delayed. The hope
currently is that the U.S. economy will graduate to a high growth
trajectory later this year, which will also give us earnings
growth. Recent economic data, including this morning's March
Retail Sales numbers, confirm that we are coming out of the
weather induced soft patch. But it isn't clear at this stage
whether we will get to the +3%-plus GDP growth pace in the coming
quarters that everyone is banking on.
The economic data will take some time to unfold, but we will find
out in the next few days if current earnings expectations for Q2
will stay or move down. Stocks have been able to gain ground
despite declining estimates, but we may have nearing the end of
the road for that trend.
Director of Research
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
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COCA COLA CO (KO): Free Stock Analysis Report
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