Earnings season is set to commence on Tuesday with key financial reports from major banks as the third quarter earnings unfold. Starting the week, JPMorgan (JPM), Goldman Sachs (GS), Wells Fargo (WFC), and Citigroup (C) will present their results, alongside insights from UnitedHealth (UNH) and Johnson & Johnson (JNJ) regarding the healthcare sector. On Wednesday, Bank of America (BAC) and Morgan Stanley (MS) will round out the bank earnings, with additional reports from BlackRock (BLK) and ASML (ASML).
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Thursday will also feature earnings from Taiwan Semiconductor (TSM), providing further insight into the semiconductor and AI sectors. This week is significant for economic data as well, with Wednesday’s consumer inflation figures playing a crucial role in shaping the Federal Reserve's decisions on interest rates ahead of the FOMC meeting in October. Additionally, the Producer Price Index report on Thursday will gauge wholesale inflation, followed by industrial production and manufacturing activity data on Friday.
As Wall Street's major banks prepare to report, they do so after experiencing one of their most profitable periods in a decade, though recent trends have seen a rise in yields to multi-decade highs. Analysts predict that despite strong earlier quarters, profits and revenues from trading and investment banking might decline on a quarterly basis. Over the past month, the Financial Services sector (XLF) has been one of the poorest performers in the S&P 500, down about 4%, trailing only Utilities (XLU).
As of last Friday, the five major banks have collectively lost around $270 billion in market capitalization amid sector challenges. Looking ahead, only 35% of institutional investors believe bank stocks will outperform the broader market, a significant decrease from 68% in July and 82% in December, according to Truist Securities.