The US 4th quarter reporting season gets underway in a couple of days, without the usual early releaser in aluminium giant, Alcoa, which has now split itself into two separate companies and will report later in the season.
So the major companies kicking off the season will be a trio of top banks reporting on Friday including JP Morgan Chase & Co, Wells Fargo & Co and Bank of America Corp. Smaller regional bank, PNC is also due to report, along with the world’s biggest fund manager, the giant Blackrock group.
Wells Fargo will be watched closely for any more damage from the fake accounts scandal that is still being investigated. Warren Buffett will be an interested observer with Wells Fargo his single largest investment (Berkshire Hathaway owns just on 10%).
S&P 500 earnings for the fourth quarter are expected to grow by about 3% from the year-ago period, according to John Butters, senior earnings analyst at FactSet. He wrote at the weekend that probably the biggest boost will come from the financial sector, which is projected to see growth of 13.8%.
That, however, will be helped by comparisons with “unusually low” earnings reported by both Goldman Sachs Group and American International Group in the year-ago quarter, Butters said.
Excluding those banks, earnings for the sector is expected to grow 4.4%, he said.
Two key areas to look for in bank earnings will be trading revenues and loan growth.
The stil unexplained promise of deregulation by president-elect Donald Trump, if fulfilled, could boost trading activity, while the prospect of more and quicker rate rises from the Federal Reserve could generate higher loan demand as borrowers seek to lock in interest rates while they are still low.
Another earnings highlight will be Delta Air Lines given the recent run-up in its share price.
The rise in oil prices in the past two months (since the OPEC production agreement) will feature heavily in commentary from airlines for the quarter.
Investors have noted that Lufthansa said late Friday that fuel costs will rise this year and failed to provide an earnings forecast for 2017. The shares fell 5% in Germany on Monday.
While the retail sector is not reporting earnings for another few weeks, retailers will be in focus on Friday with the December retails sales figures are released.
Last week saw retail stocks hit after Department store chains, Sears, Kohl’s Corp and Macy’s reported a weak holiday season.
More weak news is expected from the sectors in the weeks ahead.
