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Markets Breathe Big Sigh of Relief as Big Banks Beat Estimates
After a rough patch, investors definitely have something to cheer about. Earnings season got underway on Friday with positive surprises from JP Morgan and Citigroup.Bank of America followed on Monday with an excellent quarterly report highlighted by an 11% return on shareholders’ equity. Double-digits returns are a sign of health for banks and a recent increase in interest rates pushed BAC over the line.
On Tuesday, heavyweight investment banks Morgan Stanley and Goldman Sachs kept the momentum going with their own surprise beats, calming investor fears and dragging the broad markets higher.
Estimates had been trending lower with Goldman and Morgan both receiving 4 downward revisions in the past 30 days, but these two financial powerhouses both turned in results in excess of even the most optimistic forecasts.
Goldman Sachs just seems to find a way to make money quarter after quarter, regardless of market conditions. Their diversified business model includes so many profit centers that even when one division lags, another tends to take up the slack.
Though Goldman’s trading revenues of $3.1B were slightly disappointing against estimates of $3.16B, better than expected results in investment banking, foreign exchange and commodities trading contributed to net earnings of $6.28/share, easily topping the Zacks Consensus Estimate of $5.42/share.
Goldman shares rallied 1.2% on the news.
Morgan Stanley also easily topped consensus estimates of $1.00/share in net earnings, turning in results of $1.17/share -and shrugging off fears of lowered results in an environment of Fed tightening, higher inflation and a trade-war induced slowdown in Asian business
The markets rewarded Morgan shares with a rally of better than 4% at midday Tuesday.
Morgan’s best business unit tends to be equities trading and that stalwart brought in $2B in Q3, slightly better than the expected $1.9B, but surprisingly good results in underwriting and wealth management helped Morgan achieve a return on equity of 11.5%. Assets under management increased during Q3 as did net interest income – aided by higher rates and widening spreads.
Though rising rates, geopolitical risks and trade wars have had the markets on edge lately, at the end of the day it’s earnings that drive equity prices. With 199 companies expected to report this week, we are finally getting a good look at the hard data that matters, and so far, it’s been very encouraging.
US Bancorp andBank of New York Mellon both report later in the week and will round out the big-cap bank earnings picture. So far, it’s been a home-run quarter for financial institutions. More positive surprises are almost certain to reassure the markets that the sky is not falling and our biggest institutions are going to continue to churn out profits, even in the face of minor challenges.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: JP Morgan, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs
For Immediate Release
Chicago, IL – October 17, 2018 – Today, Zacks Investment Ideas feature highlights Features: JP Morgan (JPM - Free Report) , Citigroup (C - Free Report) , Bank of America (BAC - Free Report) , Morgan Stanley (MS - Free Report) andGoldman Sachs (GS - Free Report) .
Markets Breathe Big Sigh of Relief as Big Banks Beat Estimates
After a rough patch, investors definitely have something to cheer about. Earnings season got underway on Friday with positive surprises from JP Morgan and Citigroup. Bank of America followed on Monday with an excellent quarterly report highlighted by an 11% return on shareholders’ equity. Double-digits returns are a sign of health for banks and a recent increase in interest rates pushed BAC over the line.
On Tuesday, heavyweight investment banks Morgan Stanley and Goldman Sachs kept the momentum going with their own surprise beats, calming investor fears and dragging the broad markets higher.
Estimates had been trending lower with Goldman and Morgan both receiving 4 downward revisions in the past 30 days, but these two financial powerhouses both turned in results in excess of even the most optimistic forecasts.
Goldman Sachs just seems to find a way to make money quarter after quarter, regardless of market conditions. Their diversified business model includes so many profit centers that even when one division lags, another tends to take up the slack.
Though Goldman’s trading revenues of $3.1B were slightly disappointing against estimates of $3.16B, better than expected results in investment banking, foreign exchange and commodities trading contributed to net earnings of $6.28/share, easily topping the Zacks Consensus Estimate of $5.42/share.
Goldman shares rallied 1.2% on the news.
Morgan Stanley also easily topped consensus estimates of $1.00/share in net earnings, turning in results of $1.17/share -and shrugging off fears of lowered results in an environment of Fed tightening, higher inflation and a trade-war induced slowdown in Asian business
The markets rewarded Morgan shares with a rally of better than 4% at midday Tuesday.
Morgan’s best business unit tends to be equities trading and that stalwart brought in $2B in Q3, slightly better than the expected $1.9B, but surprisingly good results in underwriting and wealth management helped Morgan achieve a return on equity of 11.5%. Assets under management increased during Q3 as did net interest income – aided by higher rates and widening spreads.
Though rising rates, geopolitical risks and trade wars have had the markets on edge lately, at the end of the day it’s earnings that drive equity prices. With 199 companies expected to report this week, we are finally getting a good look at the hard data that matters, and so far, it’s been very encouraging.
US Bancorp andBank of New York Mellon both report later in the week and will round out the big-cap bank earnings picture. So far, it’s been a home-run quarter for financial institutions. More positive surprises are almost certain to reassure the markets that the sky is not falling and our biggest institutions are going to continue to churn out profits, even in the face of minor challenges.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.