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Corporate Earnings & Outstanding Bank Results

U.S. stocks posted their best week since July as solid corporate earnings and a surprise increase in retail sales suggested an economic rebound was on the way. 

During this interval, the treasuries fell below 1.6%. 

It was a very good week for banks as Morgan Stanley, Bank America and Citigroup posted better-than-expected results.  

The kicker came on Friday, 15th October 2021, when Goldman Sachs Group posted their blowout results, sending the stock 3.8% higher. 

The value of overall retail purchases increased by 0.7% in September, following an upwardly revised 0.9% gain in August., This is as shown in the Commerce Department figures on Friday.

Excluding autos, sales advanced by 0.8% in September. 
The median estimate in a Bloomberg survey of economists called for a 0.2% decline in overall sales and a 0.5% rise excluding autos. 

Here are the closing levels on Friday: – 

 Last Change %Change  
Dow Jones 35,294.76 +382.20 +1.09% 
S&P 500 4471.37 +33.11   +0.75% 
Nasdaq Comp 14897.34 +73.91 +0.50% 
U.S. 10Y 1.574%   
VIX   16.3 -0.53 -3.32% 

With the following context, it seems like happy days are here again?  

The market’s reaction last week, especially in the last 3 days, has given confidence to the bulls.  

Will the rest of corporate earnings follow the outstanding results of the major Banks? 

Additionally, at what point will the supply chain issues affect these earning going forward.  

Although Apple has already slashed its iPhone 13 production targets for 2021, there are signs that the chip crunch is getting worse and that affects many other businesses. 

On the other end, energy prices are still on the rise, and must at some point be a problem for earnings. 

This time, it looks like companies are able to pass through higher costs to the consumer. However, will such dynamics continue? What will the Feds do to curb these inflationary pressures?

What about the 10-year yield? Will it pop above that 1.6% and pressure the Tech stocks? 

There will be a lot of data releasing next week, including the industrial production, home builders index, building permits, home sales, leading indicators, and flash PMI to name a few.

While these last few days have tilted the sentiment towards risk-on, I think it would be wise to proceed with caution. 

Source: CBOE, Reuters, Bloomberg  

This commentary is written by James Gomes 
James has been in the finance industry for over 30 years and most recently worked for a large US bank for more than 20 years. 

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