Big Banks Set Positive Tone For Earnings Season

Stocks closed mixed yesterday, but remain near all-time highs.

Earnings season officially kicks off today when Alcoa reports after the close.

FYI -- Alcoa is the so-called 'official' start of earnings season because it was once the first Dow component to report earnings. And for what it's worth, Hewlett-Packard has marked the 'official' end of earnings season because it used to be the last of the Dow components to report earnings.

Ironically, both AA and HPQ are no longer part of the Dow Jones Index. But after bookending earnings season for so long, that tradition has stuck, regardless of their current Dow non-membership status.

I should also mention that Alcoa is no longer some great barometer of the market or the economy. Once upon a time that was true. But that was a long, long time ago. So I wouldn't be overly concerned with what they report later today. Nevertheless, it would still be nice to see a beat.

But earnings season has already unofficially kicked off this week with big bank stocks setting a positive tone. Citigroup, Wells Fargo, JP Morgan, and Goldman Sachs have all come out in the last couple of days and positively surprised. Of course, four stocks in one sector 'doesn't an earnings season make', but it's definitely a good start.

We'll get another 245 companies reporting earnings before the week is over.

The reason why there's always so much excitement around earnings season is because few things can move a stock like an earnings report. And it's not uncommon to see individual stocks jump (or sink) 10-20% in one day after a report.

But the market typically goes up during earnings season. And with a backdrop of a strong economy, record employment, an accommodative Fed on the verge of a rate cut, and stocks having just broken out to new all-time highs, it's looking pretty good that we'll get more gains again this earnings season.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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