S&P 500 Outlook Talking Points:
- With five banks reported, Tuesday will see the release of Bank of America and Blackrock followed by Morgan Stanley on Wednesday
- Thus far, the split performances offer little clarity for the direction of earnings season as Dow Jones giants and FAANG members wait in the wings
- Fresh quarterly forecasts are out! View Q2 forecasts for the S&P 500, US Dollar, British Pound and more.
S&P 500 Outlook: Bank Earnings Mixed Ahead of Tuesday's Reports
Five of the country’s largest banks have reported earnings as of Monday morning, delivering a series of mixed results compared to Street expectations. Friday saw the release of JP Morgan, Wells Fargo and PNC while Citigroup and Goldman Sachs announced their earnings before market open on Monday.
Data Source: Bloomberg
Compared to their one-day implied volatility ahead of earnings, Wells Fargo and PNC saw price movement within expectations while JP Morgan surprised traders with a 2% greater reaction than option pricing suggested. Elsewhere, Goldman Sachs dragged the Dow Jones lower on Monday with a notable miss compared to consensus expectations on Wall Street. The bank accounts for 5.34% of the Industrial Average – the fourth highest weighting on the index.
Data Source: Bloomberg
Earnings season will continue Tuesday with the release of first quarter results from Bank of America (BAC) and Blackrock (BLK) before the open with Morgan Stanley (MS) and US Bancorp (USB) slated for Wednesday morning. As analysts await upcoming results, implied volatility reveals traders expect the most significant price reaction from Morgan Stanley.
Data Source: Bloomberg
Single day implied volatility suggests MS shares could swing as low as $44.44 or as high as $47.96 following the results. Given that the release is slated for Wednesday, implied volatility could shift as traders jockey for positioning in Tuesday trading. On a broader basis, Bank of America is expected to see the greatest price change in the four weeks to follow with 31.14% implied volatility. Ahead of tomorrow’s quarterly report, only 2.05% change in price is implied – lower than the 2.75% average absolute move following an earnings release from the bank.
Outside of financials, Dow Jones giants United Health Group and Johnson & Johnson report on Tuesday before market open. In the tech space, FAANG member Netflix is scheduled to report after the close later that day – a key influencer of tech sentiment. For further equity and earnings insight, follow me on Twitter @PeterHanksFX.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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