Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View More
S&P 500 Continues to Trade Around Highs as Big Banks Beat on Earnings

S&P 500 Continues to Trade Around Highs as Big Banks Beat on Earnings

Izaac Brook, Analyst

JPM, GS, WFC Earnings Talking Points:

  • JP Morgan, Goldman Sachs, and Wells Fargo all reported Q1 EPS strongly above the consensus estimates.
  • Bank stocks have benefitted from the rise in US yields in 2021.
  • The US economic outlook is continuing to brighten on vaccinations and stimulus.
Advertisement

S&P 500 Continues to Trade Around Highs as Big Banks Beat on Earnings

Futures contracts on the S&P 500 point to the index opening around the fresh all-time-highs set yesterday as earnings season kicks off with blowout numbers from some of the largest US banks. JPMorgan reported Q1 EPS of 4.50 versus an estimate of 3.05, Goldman Sachs reported Q1 EPS of 18.60 verses an estimate of 10.06, and Wells Fargo reported Q1 EPS of 1.05 versus an estimate of 0.68. Strength from the financial sector can be a further tailwind to a stronger economic recovery.

S&P 500 E-Mini Futures – 45 Minute Time Frame (April 2021)

S&P 500, S&P500, S&P Futures, SPY

Chart created by Izaac Brook, Source: TradingView

Overall, strong beats in earnings painted a sharp comparison to the banks’ Q1 2020 earnings, when they set aside billions in loan-loss reserves as the economic outlook darkened. The outlook has vastly improved over the past year as vaccinations, fiscal stimulus, and easy monetary policy have supported the economy through the height of the Covid-induced recession. JP Morgan and Wells Fargo both announced the release of billions in loan-loss reserves that had been set aside at the onset of the pandemic as the depth of losses seen last spring look less likely.

Trading Forex News: The Strategy
Trading Forex News: The Strategy
Recommended by Izaac Brook
Trading Forex News: The Strategy
Get My Guide

US 10yr Treasury Yields & XLF Financial Sector ETF (December 2020 – April 2021)

US Yields, XLF ETF, US Yields and Bank Stocks

Chart created by Izaac Brook, Source: TradingView

Banks have seen both their earnings and their share prices rise alongside the rise in longer-term US yields that took hold at the beginning of 2021. As interest rates rise, the profit margins and earnings of banks rise as they charge more to lend and make more off of their ongoing activities. While the rise in 10yr yields has been bullish for banks through the end of March, further increases in yields seem to have been put on pause, with the 10yr yield remaining below the 1.70% level. Without further moves higher in yields, bank stocks may struggle to move much higher than their current levels.

--- Written by Izaac Brook, DailyFX Research Intern

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES