Courtesy of Daniel Sckolnik, ETF Periscope
Its earnings season again! Q2 results began today with a so-so report from Alcoa (AA), but they will end the week with much awaited reports from JP Morgan (JPM) and Wells Fargo (WFC). To be fair, the market began the week on the tail end of a trio of bad stories, a not-so-dynamic duo of emerging stories from the banking sector, and a single focus on the upcoming election.
AA barely matched consensus earnings estimates with a big net zero for earnings after a $0.06 one-time charge. Revenues were a little better than expected at $6 billion but weaker than last year’s $6.6 billion. The company’s initial release indicated strong product demand, tight supply, and rising prices. No word yet on other facets of their outlook for this year. The stock gapped up about 1% on the news but has since settled in around the closing price.
The trio of bad stories was China’s CPI report of -2.2%, giving rise to unspeakable deflationary fears; Japan’s very nasty 15% decline of machinery orders over last month; and the “mother” of all Spanish problems, the increase of sovereign debt back over 7%!
The first of emerging banking sector stories center on the depth of JPM’s whale trade of a loss expected this Friday. Is the trade still on? What is current estimate of loss? Virtually everyone expects the loss to exceed the initial estimate of $2 billion. Some estimates are near $10 billion. If the estimated loss is less than $5 billion, it is likely the market will sigh in relief. Imagine that!
The second half of the un-dynamic banking duo is Barclay’s continued fall of about 20% since admitting its role in misreporting (perhaps a euphemism) the LIBOR short-term interest rates. Amid a settlement of $453M to U.S. and British bank regulators over the varying misdeeds, the resignation of their CEO, and amid continued government hearings and a myriad of lawsuits, there are real questions about the survival of the historic bank.
And despite all of that, in U.S. the candidates for November’s Presidential election are ramping up their barrage of insults about each other’s competence to manage our nation’s massive debt, high unemployment, and God only knows what else.
It is a testimony to the market’s reasonable valuations that the S&P 500 posted a loss of only two points today-that is…
