This week kicks off third-quarter earnings season in full gear, as reports from financials lead the way. Bank of America, Goldman Sachs and Morgan Stanley will report later this week following Citigroup’s weaker-than-expected results issued on Tuesday.
Citigroup Inc. (NYSE: C) missed Wall Street forecasts after the bank reported net income for the fiscal third-quarter fell to $3.26 billion, compared with $3.27 billion in the same period a year ago, excluding one-time items. Earnings per share came in at $1.02 per share, compared with $1.06 per share a year earlier, and revenue fell to $18.2 billion, compared with $19.2 billion in the same period a year-ago.
On Tuesday, shares of Citigroup fell 1.49 percent to close at $48.86.
“Well, I do believe that financials, which were the star of the last few quarters, may become the drag,” said Alan Valdes, vice president of trading at DME Securities. “If you look at JPMorgan, it was the shining light of financials, now they lost money for the first time ever. They have litigation in the billions all the time. I think that might follow over to the other banks -- to Citibank, to Bank of America -- again those credit card charges will probably be down."
JPMorgan Chase & Co. (NYSE: JPM) posted a huge quarterly loss on Friday due to $9 billion in charges for legal costs and reserves, while Wells Fargo & Co. (NYSE: WFC) said its earnings rose 13 percent on lower expenses.
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“Mortgages we know are down because of the slight raise in interest rates,” said Valdes. “So I think in general you’ll see a little weaker out of the financials than we saw, and that could put a drag -- because they’re 20 percent of the S&P -- that could put a drag on the market the way the financials go.”
Earnings reports still due out this week in the midst of the government shutdown and debt ceiling dilemma are quarterly results from Bank of America, Goldman Sachs and Morgan Stanley.
On Wednesday, Bank of America Corp. (NYSE: BAC) is scheduled to report financial results before the market opens, and Wall Street expects the bank to report fiscal third-quarter earnings of 19 cents per share on revenue of $22 billion, compared with a profit of 0 cent a share on revenue of $20.4 billion in the year-ago quarter.
Shares of Bank of America edged down 0.77 percent on Tuesday to close the session at $14.24.
“Well, keep in mind we can’t really be talking about the debt ceiling because none of that’s factored in yet,” said Joseph Greco, managing director at Meridian Equity Partners. “So that will be in the fourth quarter when we do a review and find out just how much this impacted bond trading for these guys.”
On Thursday, investment bank Goldman Sachs Group Inc. (NYSE: GS) is forecast to issue fiscal third-quarter earnings of $2.58 per share on revenue of $7.40 billion, compared with a profit of $2.85 a share on revenue of $8.4 billion in the same period a year-earlier.
Goldman Sachs closed Tuesday’s trading session down 1.15 percent to $157.63.
“But trading activities over the summer, obviously, we already know JPMorgan and Bank of America were the biggest, as well as Wells Fargo, to cut some heads in the mortgage underwriting department area in the last quarter,” Greco added. “So what does that really mean, why are they making these types of cuts and what is their guidance going forward knowing now that taper isn’t necessarily 2013, but perhaps in 2014?”
Morgan Stanley (NYSE: MS) on Friday is expected to report fiscal third-quarter earnings of 44 cents per share on revenue of $7.7 billion, compared with a loss of 55 cents a share on revenue of $5.3 billion in the year-earlier period.
On Tuesday, shares of Morgan Stanley were down 0.67 percent to close at $27.99.