Financial stocks and related exchange traded funds are leading a stagnant market Monday, with investors anticipating the sector to dodge a so-called earnings recession as firms reveal first quarter results this week.
On Monday, the Financial Select Sector SPDR (NYSEArca: XLF) was up 0.5%, iShares U.S. Financials ETF (NYSEArca: IYF) was 0.5% higher and Vanguard Financials ETF (NYSEArca: VFH) gained 0.6%. [Investors May Be Overlooking Financial Sector, ETFs]
While the S&P 500 as a whole is expected to see negative earnings results, the financial sector will likely hold up. According to Bank of America Merrill Lynch, S&P 500 first quarter earnings are expected to decline 13.9% quarter-over-quarter and 6.3% year-over-year, reports David Pett for Financial Post.
However, BofAML anticipates financials to see earnings growth of 8.2% quarter-over-quarter and 4.6% year-over-year. Additionally, Jason Goldberg, analyst at Barclays Capital Inc., believes about 35% will exceed consus expectations, including Goldman Sachs Group (NYSE: GS), JPMorgan Chase (JPM) and Citigroup (NYSE: C).
“We expect less than half our coverage to grow EPS for the third straight quarter,” Goldberg said in the Financial Post article. “We look for revenues to increase 2% year-over-year and be relatively stable with the fourth quarter.”
Fueling the optimistic expectations, the sector has benefited from higher fee income, partly from increased trading revenues and improved mortgage origination. [Forex Volatility Helps Lift Broker-Dealers ETF]
First quarter earnings will officially kick off Tuesday, with JPMorgan Chase & Co. and Wells Fargo (NYSE: WFC) reporting results, writes Chris Lange for 24/7 Wall Street.
On Wednesday, Bank of America (NYSE: BAC) and Charles Schwab (NYSE: SCHW) will report results.