Banks stayed hot Tuesday, and Netflix, Inc.
Earnings focus early Tuesday zoomed in on Goldman Sachs Group Inc
So far, earnings season is getting a nice start, and 95 of the companies listed on the S&P 500 index (SPX) report this week.
GS continued the strong financial sector performance kicked off by some of its competitors last week, earning $4.88 a share in the third quarter and easily surpassing forecasts of $3.82. Trading revenue helped drive performance, rising 17% and in line with solid trading activity reported by some other big banks last week. Fixed income trading seems to be driving the increased trading activity across the sector, a reflection of rising market volatility last quarter in expectation of a possible Fed rate hike. GS stock rose 1.5% in premarket trading, and bank earnings aren’t over yet. Tomorrow brings Morgan Stanley
JNJ posted earnings of $1.68 a share, beating Wall Street analysts’ consensus estimates by 3 cents. The company also raised its outlook for earnings in 2016 to $6.68 to $6.73 a share from its prior guidance of $6.63 to $6.73 a share.
Though earnings may be center stage, don’t forget the Fed. Yesterday’s speech by Fed Vice Chair Stanley Fischer, who warned of the dangers of keeping interest rates too low for too long, did nothing to change already high expectations for a December rate hike. Chances for a hike that month are near 70%, according to CME Fed funds futures.
From a technical perspective, the S&P 500 index (SPX) closed below support at 2128 on Monday, the lowest close in over a month. However, the market barely fell under that, and today it looks like stocks may be rallying, so expect 2128 to continue to be a key support level.
Oil futures, which fell back below $50 a barrel on Monday, again traded above $50 early Tuesday after some analysts noted that inventory levels are building more slowly than usual for this time of year. Forecasts for a cold winter in North America that could lead to higher energy usage also may be giving oil and natural gas prices a boost. The stock market continues to take some direction from oil, so watch U.S. inventory data closely this week. Technical resistance for nearby U.S. oil futures is at $51.70.
Netflix (NFLX) and International Business Machines Corp.
Earnings to Watch Later Tuesday/Early Wednesday: Much of Tuesday’s major earnings action occurred before the open, leaving less excitement for after the close. One exception is chip maker Intel Corporation
Tired of Earnings Losses? This is the fifth-consecutive quarter in which S&P 500 (SPX) earnings are expected to decline, but it’s also the last, according to S&P Global. In fact, next year could see strong annual earnings per share growth of 13.5%, though a large portion of that may come from the energy sector, which faces relatively easy comparisons to a year earlier. Even with energy removed, S&P Global predicts 6.9% earnings per share growth for S&P 500 stocks next year. So what does that mean for stocks? Sadly for anyone who stood on the sidelines during this long EPS trough, the best time to get in might have been a few quarters ago, if historic data hold true. History shows that investors who put their bets on the stock market after the second consecutive quarter of an earnings dip tended to have the best results, S&P Global said. Of course, past performance doesn’t necessarily predict the future.
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