Big Banks Beat Expectations to Begin Earnings Season

Stocks spiked this morning after earnings season unofficially began with a trio of strong quarterly reports from big banks. However, the major indices ended mixed on Wednesday with two coming off intraday highs and the NASDAQ plunging by about 1%.

The big story of the session was quarterly reports from JPMorgan (NYSE:JPM, -1.87%), Goldman Sachs (NYSE:GS, +2.34%) and Wells Fargo (NYSE:WFC, +5.53%). Each of these banking behemoths beat on both the top and bottom lines. In fact, JPM crushed the Zacks Consensus Earnings Estimate by 47.5%, while GS beat by 90% and WFC surprised by 52.2%.

That’s a nice start to an earnings season with some lofty expectations, including earnings growth of more than 20% and revenue growth of about 5.6%. It was also encouraging that Wall Street responded well to two of those reports, suggesting that finicky investors were impressed by what they saw.

Given these strong reports from big banks, the Dow managed to stay in the green on Wednesday even as its counterparts slipped into negative territory. It gained 0.16% (or about 53 points) to 33,730.89. However, it pulled back from an intraday high earlier in the session after soaring by approximately 200 points.

The S&P momentarily reached a new high on Wednesday as well, which wasn’t too hard since it was at a record when the opening bell rang. But it declined as the day continued and finished lower by 0.41% to 4124.66.

A rough day for tech fought against the strong earnings reports, which impacted the S&P but really shellacked the NASDAQ. The tech-heavy index dropped 0.99% (or about 138 points) to 13,857.84. For a moment, the NASDAQ joined its counterparts in the morning rally and briefly crossed 14K again, but finished with a loss that pretty much takes out Tuesday’s 1.05% advance.

All of the FAANGs were lower, especially losses of more than 2% for Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX), as well as dips of nearly 2% for Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). Meanwhile, Tesla (NASDAQ:TSLA) was off almost 4% and Microsoft (MSFT) dipped over 1%.

The other big story of the day was Coinbase (COIN) going public through a direct listing, which soared to nearly $430 this morning. In other words, it had a more than $100 billion valuation for a while, but then things calmed down and it closed at $328.

“This is a landmark moment for the crypto space and a huge success story,” said Dan Laboe in today’s Headline Trader. “Coinbase is the first crypto company IP, and its massive initial valuation reflects the excitement in the market about this technology.”

Speaking of excitement, we’re at the start of earnings season and some of the big names reporting tomorrow include Bank of America (NYSE:BAC) and Citigroup (NYSE:C), among dozens of others. And let’s not forget that Taiwan Semiconductor (TSM) goes to the plate on Thursday as well.

Today's Portfolio Highlights:

Headline Trader: These big banks reporting this week will have to deliver fantastic results to see positive price action... and that’s exactly what financial giant Goldman Sachs (GS) did this morning. In fact, Dan called the report “unbelievable”. Earnings soared 500% year over year and beat the Zacks Consensus Estimate by 90%, while sales jumped 159% year over year. The top line also beat our expectations by 48%. Despite soaring 55% over the past six months to new highs, the editor still thinks GS is a “tremendous” buying opportunity with a price target poised to jump. The company has been a very adept deal maker amid this unprecedented pandemic, and has been taking full advantage of market volatility that is primed to return in the coming months. It has a bunch of big deals and market action all set for the rest of 2021. Dan is a big fan of GS, especially after today’s report, and so he added the stock on Wednesday. Make sure to read his complete commentary for tons of information on this new pick.

Surprise Trader: Earnings season has finally begun, so its about to get a whole lot busier for this portfolio. On Wednesday, Dave went to the transportation – truck industry to pick up Landstar Systems (LSTR), a Zacks Rank #2 (Buy) provider of integrated transportation management solutions. The company has beaten the Zacks Consensus Estimate for three consecutive quarters now, and has a positive Earnings ESP for the quarter coming after the bell on Wednesday, April 21. The editor added LSTR today with a 12.5% allocation, while also selling Golden Entertainment (NASDAQ:GDEN) for a 15.1% return in just a little over a month. Read the complete commentary for more on today’s moves.

Blockchain Innovators: "The excitement today surrounded the IPO of cryptocurrency exchange Coinbase. Trading under the ticker COIN, Coinbase's direct listing price of $250 gave it a valuation of $65 billion. Compare that to the CME Group's (NASDAQ:CME) $74 billion valuation and you see just how big this crypto game has become. If you think that's a starry-eyed valuation, think again. CME Group is set to post about $1.2 billion in revenue this upcoming quarter, while Coinbase posted $1.8 billion in revenue last quarter.

"That $250 never printed as the stock opened up for trading this afternoon at $381. It spiked up to $430 in the first few minutes before rolling over and spending the next few hours searching lower for a bid. That bid finally came back in down at $310, with the stock eventually ticking up to $328. That puts the company at an $85 billion valuation on the first day of trading.

"A great start to earnings season with financials having a good day. An exciting IPO in Coinbase helped create a buzz in the market. From here on out, it is a sprint as earnings season is underway. Early on, it is all about the financials, which could continue to help the small caps along. For now, it is a very good sign." -- Dave Bartosiak

Have a Great Evening,
Jim Giaquinto