The Dow Jones Industrial Average gained over 100 points to start Wednesday morning’s session as Goldman Sachs and Bank of America beat Wall Street’s fourth-quarter earnings expectations.
Goldman Sachs generated $6.04 per share in profit for the fourth quarter of 2018, versus the $4.45 per share estimate of analysts surveyed by data company Refinitiv. The investment bank also posted revenue of $8.08 billion, beating estimates of $7.55 billion.
Bank of America’s earnings came in at 73 cents per share, beating the 63 cents expected. Revenue was $22.7 billion versus initial estimates of $22.397 billion.
“For Bank of America, they performed well in their traditional banking areas,” said Ken Leon, an analyst at CFRA Research. “We did see better-than-peers deposit and loan growth. There was also healthy growth in consumer banking.”
“Overall, Goldman had a good quarter. We did not see a multibillion dollar reserve for Malaysia, but that’s going to be top of mind,” said Leon, referencing the 1MDB scandal.
Solid Start for Banks
Citigroup, one of the other large banks reporting earnings this week, kicked off calendar fourth-quarter earnings season by reporting stronger-than-expected earnings. Citigroup reported $1.61 in profit per share, besting Wall Street expectations of $1.55 per share.
Wells Fargo & Co. finished 2018 by posting a net income of nearly $6.1 billion, or $1.21 in diluted earnings per share.
“The real economy is doing well,” said Citigroup Chief Financial Officer John Gerspach. “Then you’ve got what I’ll call the financial economy…I think there’s a good deal of concern around the world as to how do we exit this period of quantitative easing,” he said, referring to the Federal Reserve’s move to raise rates and reduce the availability of easy credit.
“What remains to be seen is whether the financial economy has an impact on the real economy in 2019,” Gerspach added.
Thus far in January, the markets have rebounded off a December’s doldrums, but some analysts question whether it’s sustainable moving forward.
“We are chalking up the S&P 500’s YTD gain of 3.6% primarily to the cessation of tax loss selling in the New Year,” said DataTrek Research co-founder Nicholas Colas. “That list of the biggest S&P 500 losers in 2018 we published last month is up an average of 9.5% YTD, a data point which supports this idea.”
“From now on, US stocks will have to earn further gains. Earnings season kicks off this week, the market’s first challenge. US/China trade will likely have to wait for Davos, which is 9 days away,” Colas added.
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