The start of earnings season saw stocks report mixed results across the major sectors of financials, industrials and consumer staples. While much of the market has been focused on artificial intelligence and technology, The performance of the financial sector is a clear indicator of the U.S. economy this year.
Of the eight S&P 500 companies that reported earnings this week, 75% reported profits that beat analyst expectations, while the remaining 25% missed the consensus. Five companies reported revenue that beat expectations, while the rest reported revenue that fell short of expectations.
Wall Street closed up about 1.24% by the end of the week. Of the three S&P sectors that reported earnings, the financial sector has the highest weighting in the S&P 500 at 12.6%.
As inflation rate declined in June, investors were banking on a rate cut following the Labor Department’s monthly release of the Consumer Price Index. At the sector level, financials, consumer staples and industrials were expected to benefit from the rate cut.
About Finance
Large financial institutions including JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Bank of New York Mellon (BK) had all reported revenue beats by Friday.
Citigroup (C) and Bank of New York Mellon (BK) shares rose in premarket trading after their respective earnings reports, but JPMorgan shares fell about 0.9% after the largest U.S. bank by assets increased its loan loss reserves. The company maintained its full-year net interest income guidance of about $91 billion, below the Visible Alpha consensus estimate of $91 billion. JPMorgan also saw its investment banking fees improve as market revenue improved.
Citigroup (C) shares rose 2.9% in premarket trading after beating Wall Street expectations. The bank also announced a $1 billion share buyback and maintained its full-year earnings guidance. The bank also reported higher service revenue and lower expenses during the quarter.
Bank of New York Mellon (BK) shares also rose in premarket trading on Friday after the bank reported second-quarter profits that beat Wall Street expectations. The bank also reported lower expenses, which led to higher net interest income.
Wells Fargo shares fell sharply by about 5.7% in premarket trading on Friday after the San Francisco-based bank maintained its outlook for net interest income for 2024. The bank also raised its outlook for non-interest expenses.
Expanding into the industrial sector
Delta Air Lines (DAL) on Thursday reported weaker-than-expected revenue and profit. The Atlanta-based airline’s shares fell about 8.6% in premarket trading Thursday, helping drag down the airline sector, led by United Airlines (UAL) down 3.9% and American Airlines Group down 4.1%.
During a media appearance, the airline’s CEO said that fare cuts are affecting the company.
Meanwhile, shares of Fastenal (FAST) rose about 2.7% on Friday after the company reported earnings. The company’s sales, often seen as a gauge of the health of the industrial economy, beat expectations.
Overview of daily necessities
In the consumer sector, Conagra Brands (CAG) and PepsiCo (PEP) both beat earnings expectations but missed revenue estimates.
Shares of packaged food maker Conagra Brands (CAG) fell 4.7% on Thursday after the company gave a lower-than-Wall Street forecast for its profit outlook for fiscal 2025. The company said it expects inflation in its cost of goods sold to continue into next year.
PepsiCo (PEP) shares fell 2.4% in premarket trading Thursday after the company reported a mixed quarterly report. The beverage giant’s CEO said the business delivered net revenue and EPS growth during the quarter, but was weighed down by weak performance from its North American ready-to-eat division and impacts related to the recall of certain products at Quaker Foods North America.
About 78 companies in the S&P 500 are scheduled to report earnings next week, including BlackRock (BLK) and Goldman Sachs (GS) on Monday. Bank of America (BAC), Morgan Stanley (MS) and UnitedHealth (UNH) are scheduled to report on Tuesday. Johnson & Johnson (JNJ), Kinder Morgan (KMI) and United Airlines (UAL) are also scheduled to report on Wednesday.
Netflix (NFLX) and Abbott Laboratories (ABT) are due to report earnings on Thursday, while American Express (AXP) is scheduled to report earnings on Friday.
