Banks and Financials Report
Most of the large banks report today. Pre-market C, GS, JPM are trading near Thursday’s closing levels, having been higher earlier this morning.
Citigroup reported a 16% gain in profits due to lower taxes. JPM revenue grew 14.6% on a year-over-year basis, beating analysts estimates by 0.07. Jamie Dimon reported revenue of $33.1 billion vs. estimates of $27.7 billion. PNC reported a huge beat of (0.62) vs. estimates.
Banks Earnings Better Than Expected.
Given the fact that the big banks are reporting better than expected earnings for the second quarter we anticipate the financial sector (XLF) will outperform in the short-term. Banks have underperformed in the first half, but show the potential for higher prices as the bullish cycle crosses through the zero line.
Banks have historically traded better in the second half.
Banks and Valuations
JPM, like many big banks, are undervalued versus future earnings. With the surge in revenues just reported, future cash flow value (shown below) will increase. That said, we need to see institutional investors buying shares in the short-term. We will follow their lead.
S&P 500 and Banks
Financials have yet to reach overbought conditions. If this continues we would anticipate a bullish outcome for the big banks and the S&P 500 as the latter trades at resistance.
Most sectors show similar results as the Financial (XLF) sector chart above. We would anticipate the S&P 500 above resistance in short order as pessimism continues to grip the markets.
Chris Ciavacco also noted outflows similar to November 2016 during the presidential election cycle. If these recent outflows reverse as they did in early 2017 we should be back at all-time highs very soon.
As always we will look for confirmation from institutional investors.
In Europe 12 of 13 markets are trading higher. In Asia 10 out of 11 markets closed higher.
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More on Banks (2017) results:
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