Market Preview: Positive Financial Sector Reports Lift Markets


Markets moved higher Wednesday, but were trending lower into the close, after an impressive earnings report from Goldman Sachs (GS) lifted the stock almost 10%. While the beat on earnings lifted the stock, they do not put to bed the ongoing investigation into the money manager by the Malaysian government, or the U.S. Federal Reserve. Markets gave back some of Wednesday’s gains after news hit the wire late afternoon, that the U.S. will be seeking criminal charges against Chinese telecom company Huawei, accusing the company of stealing trade secrets. The ongoing trade tension between China and the U.S. showed signs of progress in the latest round of talks, but the Huawei investigation looms large over the fragile negotiations. No apparent progress has been made on the continuing government shutdown, with both sides now sniping about President Trump’s scheduled State of the Union address later this month.

While pundits debate the exact economic impact the partial government shutdown is having on the economy, we are certain it is impacting the release of economic numbers on which analysts base their recommendations. The latest casualty were retail sales numbers for December, which were due to be released Wednesday, and are now delayed. Thursday we will get the release of jobless claims, which are expected to tick up slightly as more federal workers file claims. The consensus total is for 221K claims. Analysts will also take a look at the Philly Fed Business Outlook, but housing starts, also due Thursday, are delayed.

While financials continue to report Thursday, with earnings from Morgan Stanley (MS) and American Express (AXP), we’ll also hear earnings news from Taiwan Semiconductor (TSM) and Netflix (NFLX). Morgan Stanley, which suffered a dismal 2018, rallied Wednesday along with other banks, tacking on 3.75%. The company is expected to report earnings of $.92 before the market open Thursday morning.

Analysts are highly anticipating Netflix earnings, after the company announced it is raising prices for its subscription services effective immediately for new subscribers, and over a three month period for current customers. The stock has been on a blistering pace the past few weeks, and is up over 50% from an intraday low set December 26th. Investors will be looking for projections of what the price increase means for earnings going forward.

Earnings continue to roll in from financials Friday, when State Street (STT) and Suntrust Bank (STI) both report. Analysts will also hear from oil services company Schlumberger (SLB). This is Schlumberger’s first report since oil prices tanked late in 2018. Revenue is expected to drop 5% sequentially, and the company has projected a possible 15% potential revenue drop in North America, as fracking revenue has declined. After hitting a high of just below $80 in 2018 the stock has been almost cut in half, now trading at just over $41.   

Friday investors can pour over industrial production numbers and consumer sentiment, from the University of Michigan survey. Consumers are expected to see a somewhat bleaker landscape, as the survey number is projected to drop to 97 from December’s final reading of 98.3. Mixed messages abound as the government shutdown is a negative, trade negotiations seem slightly positive, and the market rebound in 2019 has been strong.