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Comic: Will A Bad Earnings Season Spoil The Fed’s Rate Cut Party?

Published 07/16/2019, 05:22 AM
Updated 07/16/2019, 09:55 AM

By Jesse Cohen

Investing.com - The U.S. second-quarter earnings season shifts into high gear on Tuesday, with banking giants JPMorgan Chase & Co (NYSE:JPM), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC) and Charles Schwab (NYSE:SCHW) all set to report results before the opening bell.

Other big names slated to report this morning include, Johnson & Johnson (NYSE:JNJ) and Domino’s Pizza Inc (NYSE:DPZ). United Continental Holdings (NASDAQ:UAL) and CSX (NASDAQ:CSX) are then due to report after the bell.

Looking ahead to the rest of the week, Wednesday’s sees Bank of America (NYSE:BAC), Netflix (NASDAQ:NFLX), IBM (NYSE:IBM), and eBay (NASDAQ:EBAY) post their latest financial results.

Microsoft (NASDAQ:MSFT), the world’s most valuable company, is on the docket for Thursday, along with Morgan Stanley (NYSE:MS), UnitedHealth (NYSE:UNH), and Honeywell (NYSE:HON).

Finally, American Express (NYSE:AXP) and Blackstone (NYSE:BX) round up the week when they report on Friday.

The outlook for this earnings season is bleak, however. Analysts expect S&P 500 earnings to have fallen by 3% in the second quarter, according to FactSet data. If confirmed, it would be the first earnings recession since 2016.

Read more: Q2 Earnings Showdown: 2 Sectors To Avoid, 1 To Buy: Jesse Cohen

Citigroup (NYSE:C) kicked off earnings on Monday by reporting second-quarter numbers that topped analyst expectations. But a decline in net interest margin underlined risks for financial firms in a lower interest rate environment.

U.S. stocks have rallied since early June, reaching a series of record highs after Federal Reserve Chair Jerome Powell set the stage for a rate cut later this month.

The only question is how large of a cut will the Fed deliver at its July 30-31 policy meeting. Markets have fully priced in a 25-basis point cut. There is also a 30% probability of a 50 bps cut.

For our latest Investing.com social media weekly poll, we asked our users:

Will Q2 Earnings Be As Bad As Forecast?

In what can be seen as a surprising outcome, the poll results revealed that the majority of voters expected the second-quarter earnings season to be better than expected.

Overall, when taking votes from both Facebook (NASDAQ:FB) and Twitter into account, 55% voted that earnings will outperform.

In contrast, 45% said the upcoming earnings season will be as bad as forecast, if not worse.

Read more on our poll results here.

-- Reuters contributed to this report

To see more of Investing.com’s weekly comics, visit: http://www.investing.com/analysis/comics

Latest comments

We are at the end of the cycle. Sooner or later a recession will strike. Rate cut will take place faster towards zero again. Fed will as usual smoke u with delays and “cut lesser than expected” jawboning. They will blame trade war but really its a debt cycle. As of now, we might see the very last abnormal spike in market before it all came crashing now. Its call melt up. This crash will be the biggest going by the balance sheet weakness.
We need a good cleanse.
I think the Fed will keep rates as low as needed until they clear their balance sheet. then they will raise rates again. I'm already betting on a market correction before the elections. recession is a slim possibility but a correction is inevitable
a BIG correction
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