Banks Come Through: Earnings This Week


Earnings season began on a strong foot, thanks to financials and a handful of other key stocks.

Bank of America (BAC), Goldman Sachs (GS) and Citigroup (C) led the charge. Stronger banking activity was the big driver, also lifting smaller regionals like Comerica (CMA) and M&T Bank (MTB).

The industry is profiting more from lending at the very same time its securities revenues weaken. That trend toward old-fashioned banking ironically saved the day at GS, which usually makes a ton of money trading.

Other Wall Street heavyweights JPMorgan Chase (JPM) and Morgan Stanley (MS) weren’t so lucky. Weak bond trading hurt both, although MS suffered an additional drop in its wealth-management business.

Outside the financial sector, three other well-known consumer-facing names pre-announced good news before their quarterly reports. General Motors (GM) hiked its guidance as CEO Mary Barra continues to rationalize the sprawling multinational. The automaker has consolidated above its 200-day moving average since the news. Is its momentum finally turning?

General Motors (GM) chart with 50- and 200-day moving averages. Is a “golden cross” coming soon?

Netflix (NFLX), which issues its numbers tonight, raised subscription fees by 13-18 percent to help cover the cost of original content. Analysts loved the move, seeing the price increase as a sign of its customer loyalty. Don’t forget its monthly fees remain far below the typical cable bill.

Lululemon (LULU) said revenue in its fiscal fourth quarter was running ahead of earlier guidance thanks to a strong holiday season, online sales and overseas growth.

Other retailers suffered. Macy’s (M) had its worst drop ever on January 10 as a pre-Christmas slowdown forced management to cut full-year guidance. Fellow department-store operators Kohl’s (KSS) and Nordstrom (JWN) also dropped on weak Decembers.

Transports had a mixed performance. United Continental (UAL), the best-performing airline over the last couple of years, surpassed estimates after growing business at its several domestic hubs. American Airlines (AAL) missed, and worries about the government shutdown weighed on Delta Air Lines (DAL). Railroad operator CSX (CSX) also dropped on poor guidance.

Then you have Ford Motor (F), which is moving in the opposite direction as GM. F had its biggest drop in a year yesterday after management blamed weak profitability on tariff pressures and Brexit uncertainty.

Rounding out the big names, HMO giant UnitedHealth (UNH) beat earnings and revenue estimates thanks to continued growth at its Optum services unit. Industrial supplier Fastenal (FAST) also rallied 6 percent today on a strong set of numbers.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.