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Earnings Season Ahead

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In quarters past, we in the world of finance reporting would be sounding the trumpets for the ushering in of a new Earnings Season, which was to commence with aluminum giant Alcoa’s (AA - Free Report)  report after the closing bell with Monday or Tuesday of a week just like this. But really, this was always just a convenient formality that didn’t have much integral meaning to earnings season as a whole nor the general domestic and global economies they help illustrate. If you want to get an early foothold on the global marketplace, for instance, you’d do better to focus on FedEx (FDX - Free Report)  numbers (which happened to miss consensus estimates by 20% in its fiscal Q1 2018 report a few weeks ago).

That said, if you are interested in the lion’s share of data related to quarterly gains from the finance sector, then you have indeed found the right week. By this time Thursday morning, we will have seen Q3 earnings results from JPMorgan (JPM - Free Report)  and Citigroup (C - Free Report) . By the opening bell this Friday, we’ll also see Q3 reports from Bank of America (BAC - Free Report) , Wells Fargo (WFC - Free Report)  and PNC (PNC - Free Report) . Major banks represent nearly half the total earnings for the finance sector, which is why we can make informed projections about whether or not we’re looking at a strong quarter or not just by tracking these large U.S. banks.

Bank stocks did not impress the market in Q2. Yet in the past month — the direct run-up to Q3 earnings season — banks are up 8%, according to Zacks Director of Research Sheraz Mian. Anticipation of a generous tax reform (tax cut) policy, plus a strong likelihood of a December interest rate hike from the Fed, helped bolster stock prices. But would disappointing earnings and revenue results start a pullback from record highs, not just among companies in the finance sector but across the board? After all, what industries can claim they have no involvement with the biggest Wall Street banks?

Consider also that Q3 reports for the banks will not have any actualized data related to tax policy or a higher interest rate, thus they will not appear on the books this quarter. The good news is yearly comps should be beatable, so expectations of a lousy quarter are not warranted at this stage. For a comprehensive report on this week’s coming earnings reports, please read Sheraz’s latest Earnings Preview: Are Bank Stock Gains Sustainable?

Aside from the big banks, we also look for earnings data Delta Air Lines (DAL - Free Report)  on Wednesday morning and Domino’s Pizza (DPZ - Free Report) on Thursday. So while the frequency of new reports will be milder than we will see in the coming next few weeks, we will hear from several heavy hitters representing different sectors.

In the meantime, will stock indexes keep their brave chin pointed forward to new record highs? If this week’s reporting companies all beat estimates and raise guidance, how much higher can we expect markets to rise?

It should be fun. Futures this Monday morning are all up a half-hour before regular-day trading begins.