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Q3 Earnings Reports to the Rescue: JPM, C, WFC

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Friday, October 12, 2018

Keeping in mind the old adage “idle hands do the devil’s work,” and seeing as how no experts on Wall Street can conclusively explain the reason behind the titanic market sell-off of the past couple days, perhaps the real culprit is the lack of economic data to shore up trading activity.

The longer we went only getting dribs and drabs of new information to influence our investment schemes — along with the fact that they were almost all positive, from economic growth to jobs numbers to relatively benign affects from natural disasters, etc. — only increased tensions in the market until something burst.

It’s not particularly rational, although perhaps cooling down from our overheated, overbought markets — repeated new all-time highs in all major indexes, for instance — was well-founded overall. But the way it happened, with massive sell-offs taking down the Dow more than 1300 points in the past two trading sessions, provided evidence that we needed something new to consider before making wild trades, willy-nilly.

Enter Q3 Earnings Season, the salve to the sell-off burn. With big banks bringing forth their quarterly results, we no longer need concern ourselves with what happens when 3.2% on the 10-year t-bill eventually gets to 5%. The nuts-and-bolts reality of our biggest financial institutions brings new, needed grist to the mill. And right on cue, market indexes are roaring back in pre-market trading.

JPMorgan Chase (JPM - Free Report) beat the Zacks consensus estimate on its Q3 earnings by a solid dime: $2.34 per share versus $2.24 expected. Revenues of $27.3 billion were modestly better than the $27.2 billion analysts had been looking for, and notably above the year-ago tally of $26.5 billion. JPMorgan has not missed earnings estimates in 3 years, and the average positive surprise of the last 4 quarters is 4.2%.

Equity Markets rose 17% year over year, while Provisions for Credit Losses fell double that amount, -35%. JPM shares are trading roughly even year-to-date, although following its earnings report the stock is up 1.7% at this hour. For more on JPM’s earnings, click here.

Citigroup (C - Free Report) also outpaced estimates on both its top and bottom lines, posting $1.74 per share versus $1.66 in the Zacks consensus, and well above the $1.42 from the year-ago quarter. Its $18.39 billion in revenues was a modest beat from estimates and the $18.17 billion reported in Q3 2017. This is Citi’s 15th straight quarterly positive earnings surprise; the company has not missed since Q4 2014. For more on C’s earnings, click here.

The third of the Big 3 of the big banks reporting this morning, Wells Fargo (WFC - Free Report) , missed estimates by 4 cents to $1.13 per share in its Q3 report this morning. A one-time charge accounts for 3 cents of the miss, and results are up from $1.04 per share in the year-ago quarter. Revenues slightly beat estimates and year-over-year results to $21.94 billion, so call it a mixed report. Wells Fargo continues to dig out from its falsified-accounts scandal, and shares are down 15% year to date. WFC is trading up 1.6% before the opening bell today. For more on WFC’s earnings, click here.

Mark Vickery
Senior Editor

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