“FAS” ETF Jumps on Big Banks’ Earnings Beat

Big banks were among the winners on Tuesday as third-quarter earnings season kicked off with 11 companies in the S&P 500 reporting—9 beat earnings expectations while only 2 missed the mark. The strength in big banks helped the Direxion Daily Financial Bull 3X ETF (NYSEArca: FAS) jump over 3% in Tuesday’s trading session.

When looking at banks specifically, they went 5-for-7 on earnings beats with Goldman Sachs and Wells Fargo being the lone two misses.

Per a CNBC report, “major U.S. bank Goldman Sachs reported a rare miss in profits. Investment banking produced $1.69 billion in revenue, below the $1.72 billion estimate. Wells Fargo was the only other company to miss on earnings, as the embattled company navigates its restructuring operations. But Wells Fargo traded higher 3% as investors seemed to welcome the bank’s new chief Charles Scharf set to begin his role next week.”

Here’s how the banks stacked up in terms of earnings per share:

  1. Black Rock: earnings beat
    1. Actual: 7.19
    2. Expected: 6.96
  2. Charles Schwab: earnings beat
    1. Actual: 0.70
    2. Expected: 0.64
  3. Citi: earnings beat
    1. Actual: 2.07
    2. Expected: 1.95
  4. First Republic Bank: earnings beat
    1. Actual: 1.31
    2. Expected: 1.21
  5. Goldman Sachs: earnings miss
    1. Actual: 4.79
    2. Expected: 4.81
  6. JP Morgan: earnings beat
    1. Actual: 2.68
    2. Expected: 2.45
  7. Wells Fargo: earnings miss
    1. Actual: 0.92
    2. Expected: 1.24

A volatile summer due to fears of waning global growth, the U.S.-China trade war and inverted yield curves caused a mass exodus from U.S. equities and into safe haven assets like bonds as well as precious metals. The better-than-expected earnings thus far contrast what some analysts were expecting for the third quarter.

“Ahead of each earnings season in 2019 the consensus estimates were calling for negative earnings growth but as companies report we see results coming in better-than-feared,” said Nick Raich, chief executive officer of The Earnings Scouting Report.

Of course, it remains to be seen whether this trend of “not-so-bad” results can persist through the rest of 2019. As it currently stands, the U.S. and China are amid trade negotiations, which might play a factor in fourth quarter performance.

Some analysts, however, are optimistic that better-than-expected earnings will likely be the trend through the rest of third-quarter earnings season.

“That better-than-feared trend is persisting in the early reporters and that will persist the remainder of earnings season,” said Raich.

As for FAS, the fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Russell 1000® Financial Services Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is a subset of the Russell 1000® Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market.

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