It’s finally here, and people like me now have something concrete to talk about: Q2 Earnings Season. It tends to be the quarter that least affects stocks and the market as a whole, based on the summer season and where it lays within the fiscal year: Q1 kicks off performance metrics for the full year, and Q3 brings them into the final stretch. Q4 is the final word. Q2 is… Q2.
JPMorgan Chase (JPM - Free Report) beat Q2 estimates on both top and bottom lines, reporting $1.82 per share compared to the Zacks consensus of $1.57. Revenues of $26.4 billion topped expectations of $24.8 billion, as well as the year-ago number of $25.2 billion. CEO Jamie Dimon was quoted as saying the U.S. consumer remains healthy, but that without gridlock in Washington DC, his company would grow faster.
JPM shared are trading down in the pre-market following the earnings announcement, which may speak to the “quality” of the beat. Certain aspects like a low loss provision in the quarter might be seen as temporary. But the company was boosted by lending, which illustrates financial market activity which we may see pop up elsewhere in the economy.
Citigroup (C - Free Report) beat earnings expectations as well, reporting $1.28 per share — 7 cents better than the Zacks consensus expectation of $1.21. Revenues of $17.90 billion also topped the consensus estimate of $17.32 billion, up 2% year over year. Healthier revenue streams were somewhat offset by higher costs of credit in the quarter. Like JPMorgan, Citigroup has a recent history of beating earnings estimates quarter after quarter. Pre-market shares are down slightly, however.
Wells Fargo (WFC - Free Report) also beat the Zacks consensus, by 5 cents to $1.07 per share. Revenues, however, missed just slightly at $22.2 billion from the $22.3 billion expected. Pre-market shares of Wells Fargo are also down following the report; perhaps whatever good was expected by financial analysts has already been baked into the share price. Although market participants look to be in a relatively hesitant move at this hour, so perhaps we’re merely looking at the present mood of traders, subject to change.
PNC Financial (PNC - Free Report) beat earnings estimates as well this morning, posting a 9-cent beat to $2.10 per share. Revenues of $4.06 billion improved on the $4.00 billion expected, 7% greater than in the year-ago quarter. This Zacks Rank #3 (Hold) stock is also trading down slightly in today’s pre-market.
Keep in mind these banking majors are all up big from this time a year ago, 50+% in some cases (aside from Wells Fargo, which has had its internal issues about generating false accounts and its subsequent comeuppance from regulators; it is up only 16% year over year). So perhaps a “sell the news” scenario is in place for these companies on the first full day of Q2 earnings season, which is nothing to fear for longer-term market participants.
Inflation Metrics Muted
Elsewhere, a new Consumer Price Index (CPI) report this morning for June in unchanged, slightly under analysts’ expectations. The core year-over-year read was 1.7%, about in-line with the modest gains expected in this inflation metric. A decline in energy prices (-2.8%) and airline fares (-2.7%) were notable in these latest monthly numbers.
Retail Sales for June were also in negative territory: -0.2% on the headline, whereas analysts had been expecting a positive number. This follows a -0.3% read from May, meaning retailers have seen overall prices slip half of a full percentage point over the past two months. The drop in auto sales (-0.2%) are coming off tougher comps from a year ago, but we see broad-based weakness in retail pricing from last month.
This is the sort of thing Janet Yellen and her cohorts at the Fed pay close attention to. We are not seeing inflation bubbling up in the economy as we had expected, especially in light of strong and consistent U.S. employment figures as of late. So while the pre-market appears cautious in trading right now, the mood may shift as it did during Yellen’s testimony a couple days ago: that factors indicate a lesser likelihood of raised interest rates in the near future, which may again spring market buying to new highs.