$VIP - May encounter resistance at 50 MA.
$ROSE - Testing previous resistance level.
$RSX – Closing above 50 MA.
Both Goldman Sachs ($GS) and Morgan Stanley ($MS) beat on the top and bottom lines despite a slowdown in trading results that seemed to erode the results of competitors such as Bank of America ($BAC) and JP Morgan ($JPM).
This earnings season seems to be mixed once again, but more companies are hitting on reduced expectations for earnings. For example, Goldman Sachs on Thursday reported Q1 earnings of $4.02 per share, down from $4.29 a share in the year-earlier period. Although revenue decreased to $9.33 billion from $10.09 billion a year ago, analysts had expected the company to report earnings of $3.45 a share on $8.70 billion in revenue.
Goldman saw solid returns out of Investment banking revenue which reflected a 13% year over year increase, with financial advisory revenue of $682 million up 41%, equity underwriting up 12%.
Goldman’s chief rival, also beat the streets estimates. Morgan Stanley reported Q1 earnings from continuing operations of 72 cents per share, up from 61 cents a share in the year-earlier period. Revenue increased to $8.9 billion from $8.48 billion a year ago. Analysts had expected the company to report earnings of 59 cents a share on $8.52 billion in revenue.
The revenue beats at the large investment banks are a good sign, but it is a far cry from the disappointment of IBM and Google missing on both top and bottom lines. IBM missed for a second consecutive quarter, disappointing large tech investors. The news comes one day after as the Royal Bank of Canada ($RY) reports it is planning to spin off one of the last proprietary trading desks located inside its larger bank into a smaller privately-owned fund which the bank plans on acting as an investor in.
Goldman rebounded sharply on Wednesday and is poised to test resistance near the 50 and 200-day moving averages. Momentnum is changing and although the MACD is printing in negative territory the trajectory is flattening and could generate a buy signal. The financial could be the leaders in the move higher as the broader markets rebound.
The tech heavy Nasdaq did a reversal after declining 10%, and bounced squarely off its 50-day moving average. High flying momentum stocks like Twitter, bounced after moving lower since mid-December. Volatility retraced despite tensions in Ukraine that has the country on the verge of civil war.
Ukrainian troops have entered the center of Kramatorsk in the eastern part of the country after retaking the town’s airfield yesterday from pro-Russian militias. Ukraine’s action in multiple areas has prompted Vladimir Putin to describe the country as being on the brink of civil war. Putin is scheduled to meet with US and EU officials this week, but there does not seem like any imminent solution to his desire to take over many part of Ukraine.
The VIX volatility index moved lower by nearly 3% on Tuesday despite geo-political issues that continue to generate tensions. The strong upward movement in US stocks reduced the need for protection allowing investors to sell implied volatility. The VIX moved down and is poised to test the 50-day moving average near 14.9% after moving as high as 18% early in the trading session on Tuesday.
Twitter generated a reversal pattern after dropping to support on Friday, the stock made a slightly higher candle yesterday. On Tuesday it opened up higher, tested Monday’s low and launched from 1 EST to 4 PM EST. The support level looks like a typical place to bounce from. It was also creating what is termed a bullish wedge. While the stock is dropping, the trend lines are converging. Eventually, TWTR either drops quickly to create a parallel lower channel line under the prices or it breaks out to the upside. The MACD generated a buy signal which coincides with the reversal.
Earnings season has moved into full gear, as investors begin to absorb results from some of the large companies in the S&P 500 index. Today, Coca Cola reported results that were right in line with analysts’ expectations, while J&J beat on both the top and bottom lines. After the closing bell, Intel, Yahoo and CSX will release their results.
Traders watched developments surrounding Ukraine, and stocks moved higher even though anxiety about the tense situation with Russia sent buyers into oil. Gold prices reversed course on Tuesday as a stronger than expected retail sales report pushed the US dollar higher.
Following Friday’s stronger than expected wholesale price inflation, today the labor department released a stronger than expected CPI report. According to the BLS, the consumer price index came in at 0.2% month over month compared to analysts’ expectations of a rise of 0.1%. This comes on the heels of a stronger than expected retail sales report released by the commerce department of Monday. Core CPI, which strips out energy and food c, also increased by 0.2 percent in March after edging up 0.1 percent the prior month. Year over year core CPI advanced 1.7 percent after rising 1.6 percent in February.
The S&P 500 futures contract is attempting to test resistance levels. A close above the 1850 level would recapture resistance and turn it into support. Momentum on the futures contract is stable with the MACD printing in negative territory but reflecting a flat trajectory.
The financials have been one of the worst performing sectors in April, and will likely rebound, if history is any guide. Historically the financial sector slightly outperforms the broader markets, moving higher against the S&P 500 index slightly more than 50% of the time over the past 20-years with an average increase of approximately 1%. The financials have declined nearly 1.3% in April relative to the benchmark S&P 500 index, despite better than expected earnings from Wells Fargo on Friday and Citigroup today.
Citi posted Q1 earnings excluding items of $1.30 per share, up from $1.23 a share in the year-earlier period. Revenue came in at $20.1 billion from $20.49 billion a year ago. Analysts had expected the company to report earnings of $1.14 a share on $19.36 billion in revenue.
Citi’s management has put investors behind the eight-ball by bumbling their stress test. Last month, Citigroup ($C) stock was hit by news that the U.S. Federal Reserve had barred the bank from raising its dividend or boosting its stock buybacks, saying it’s too hard to predict how some parts of the bank’s global operation would fare in a sharp economic downturn.
The stock price broke through resistance on Friday, but formed a doji patter, where the open and the close were the same level which usually shows indecision and with good reason prior to Monday’s earnings. Shorts will likely to be forced to short cover which could sent the stock higher on Monday.
Stocks started the US trading session on the defensive continuing to experience liquidation in high momentum stocks. The Bio-tech index has been hammered, and is looking for support levels to attempt to find a bottom, while long term US yields tested the 2.60 level. Both JP Morgan and Wells Fargo released earnings that were broadly in line with expectations.
JPMorgan Chase reported an 18.5% slump in first-quarter earnings on Friday. The net earnings of $5.27 billion, or $1.28 a share, came in slightly below analysts’ expectations of $1.40 a share on revenue of $24.53 billion. Revenue dropped to $23.86 billion. The stock was lower in pre-market proprietary trading by nearly 3%.
Wells Fargo edged higher after the banking giant reported net income of $5.89 billion, compared with year-earlier income of $5.17 billion. Per-share earnings were $1.05 versus $0.92 a year earlier. Revenue declined to $20.6 billion. Analysts polled had expected per-share earnings of $0.97 on revenue of $20.6 billion. Expenses declined significantly at the banking institution helping on the bottom line. Commercial loans were strong as well compared to $JPM which suffered in this space.
The $XLF financial spider ETF tumbled on Thursday slicing through support near both the 50 and 100-day moving averages. The next levels of target support is an upward sloping trend line near $21.25. Momentum is negative as the MACD (moving average convergence divergence) index prints in negative territory with a downward sloping tranectory.