Earnings season is off to a decent start as investors rotate into financials and industrial stocks.
Morgan Stanley (MS) and JPMorgan Chase (JPM) both rallied after beating estimates across the board. Other big lenders including Bank of America (BAC), Citigroup (C) and PNC Financial (PNC) advanced despite mediocre revenue. That seems to suggest investors are rotating back into the sector as economic data improves.
Other financials aside from the banks rose as well. Mutual fund giant Blackrock (BLK) stunned the naysayers by managing to attract an influx of new assets under management.
Insurer Progressive (PGR), the second-best performing financial in the last two years, ripped to a new all-time high after beating estimates and continuing to grow its base of policyholders. Travelers (TRV) also benefited from smaller underwriting losses.
Additionally, top-line numbers at retail brokerages Charles Schwab (SCHW) and E*TRADE Financial (ETFC) surpassed consensus estimates. (Both companies compete against TradeStation.)
Transports Lift Industrial Stocks
Industrials, including transportation stocks, are the next big sector. Railroads CSX (CSX) and Union Pacific (UNP) raised fares to overcome a brutal winter. Cost cuts also helped United Airlines (UAL) report better-than-expected profit.
Industrial giant Honeywell (HON) leaped to a new all-time high after beating estimates across the board and raising estimates. Aircraft maker Textron (TXT) and industrial supplier Fastenal (FAST) rallied after earnings beat estimates, although revenue was less impressive.
Some other well known companies rallied on strong results in the last week. PepsiCo (PEP) shot to a new all-time high after strong results after managing to revive demand for its once-flagging snacks and beverage lines.
Ericsson (ERIC) spiked after beating estimates across the board. Investors are eyeing the Swedish technology giant as a 5G network play and as a potential alternative to China’s Huawei.
Speaking of China, strong activity at Macau casinos gave a boost to gaming company Las Vegas Sands (LVS). Advertising firm Omnicom (OMC), a member of the communications sector, also rallied on strong results.
Good Earnings Ignored
The market shrugged at strong earnings in some cases — especially when other issues weighed on companies. Netflix (NFLX), for instance, beat estimates but warned of weaker growth going forward. Even worse, investors are worried about greater competition from Walt Disney’s (DIS) new streaming service.
Things were bleak for health care as political pressures continue to mount. That caused once-mighty HMO UnitedHealth (UNH) to have its worst day in over a year despite strong earnings, revenue and guidance. Johnson & Johnson (JNJ) eked out a small gain, with analysts praising growth of its Stelara anti-inflammatory drug.
A couple of reports could be termed as nothing but “bad.” International Business Machines (IBM), for example, dropped after revenue missed estimates. Weak cloud-computing results made investors worry that the early technology leader is failing to adapt to the 21st century.
Bank of New York Mellon (BK) was the other big loser, predicting higher costs to maintain large deposits. The firm is different from most other banks because it focuses on large institutions rather than the general public.
In conclusion, earnings season began with fears of declining profits. But so far most companies to report have pushed higher — especially those in the financial and industrial sectors.