An epic equity rally faces a major test in the coming weeks as investors learn what executives expect from earnings and earnings in the coming periods.
The fourth quarter earnings season kicked off in earnest on Friday with better-than-expected earnings from some of the country’s largest banks. Despite record quarterly profit at JPMorgan Chase & Co. and some bright spots at Citigroup Inc. and Wells Fargo & Co., shares of all three fell, with Wells and Citi each declining more than 6%.
The market reaction highlights the stakes as large companies begin to share quarterly results and, more importantly, their outlook for the coming quarters. While the results weren’t dire, stocks were hit hard, reflecting the rise in investor expectations as bank stocks rallied more than 10% for 2021 en route to Friday’s trading.
The rise of the major indexes to new highs this year, despite an accelerating toll from the coronavirus and questions about how that will affect the economic outlook, underscores the pressure on executives at large companies to explain how they expect results in 2021. will improve. earnings during the S & P’s rise of about 70% from last March’s intraday low were considered acceptable by investors as many expect a sharp recovery this year. Companies whose projections fall short can expect to be punished, they say.
“Whether they had a good quarter or not, it’s what’s next,” said Kimberly Woody, senior portfolio manager at Globalt Investments, which manages $ 1.9 billion. “Good future news is priced in this market.”