Earnings season is the heartbeat of the market - and every day brings fresh signals about where money is flowing.
With each report, we learn not just how companies are performing, but how investors are reacting.
In the Daily Beat, we spotlight the most important S&P 500 earnings moves from the prior session - the winners, the losers, and the reactions that reveal what really matters to the market right now.
Whether itβs a bellwether with broad economic implications or a niche name making waves, we cut through the noise to focus on the setups that matter most.
Here are the latest earnings stats from the S&P 500 π
*Click the image to enlarge it
Tuesday, we heard from some of the largest financial institutions in the world.
The best earnings reaction came from the $271B bank, Wells Fargo $WFC, which reported a double beat, resulting in a +3.57 reaction score for shareholders.
The company posted revenues of $21.44B, exceeding the expected $21.15B, and earnings per share were $1.66, above the expected $1.55.
At the bottom of the list was the world's largest bank, JPMorgan $JPM, which reported a double beat, but suffered a -1.33 reaction score.
They reported revenues of $46.43B, compared to the expected $45.47B, and earnings per share of $5.07, nearly 5% above the expected $4.85.
Now let's dive into the fundamentals and technicals π
WFC had its best earnings reaction since the GFC π₯
Wells Fargo had a +7.2% post-earnings reaction, and here's what happened:
Net income grew 9% year-over-year, aided by strong performance from the commercial banking and wealth management segments.
Net interest margin declined seven basis points year-over-year, but this was offset by net interest income growth of 2% over the same period.
In addition to the strong quarterly results, the management team hiked its return on tangible equity guidance, which helped fuel the positive reaction.
It's difficult to overstate how impressive this earnings reaction was. It was the best since the Great Financial Crisis!
The intraday price action was also tremendous. Early in the session, the sellers tried to step in, but the buyers quickly regained control and drove the price higher for the rest of the day.
In addition to the strong absolute performance, the stock closed at fresh multi-year highs relative to its sector benchmark XLF.
With the price on the cusp of resolving a textbook base-on-base pattern, we believe the stage is set for a fresh leg higher over the following days and weeks.
If and when WFC closes above 85, the path of least resistance will shift from sideways to higher for the foreseeable future.
JPM suffered its second consecutive negative earnings reaction π»
JPMorgan had a -1.9% post-earnings reaction, and here's what happened:
The company reported year-over-year top and bottom-line growth of 9% and 12%, respectively.
All business segments performed tremendously, but the consumer and community banking segment was the best among them. It saw net income growth of a staggering 24% year-over-year.
In addition to the excellent report, the management team issued better-than-expected net interest income guidance for the next fiscal year.
We highlighted this setup in Sunday's column of the Weekly Beat, pointing out that the stock has been in a strong uptrend since the April low, rallying over 50% in a near-vertical line.
However, we told you the trend has been losing steam recently. On Friday, the price closed below a key shelf of former highs, and it looks vulnerable to further downside.
We went on to point out that something big changed last quarter: the company reported negative top and bottom-line growth, and snapped a streak of three consecutive positive earnings reactions.
Sure enough, as we expected, the market punished shareholders again this quarter. This extended the beatdown streak to two consecutive quarters.
In addition to the deteriorating fundamentals, the price is resolving a textbook multi-month distribution pattern. So long as this is the case, there's a significant risk of further downside in the world's largest bank.
Until JPM reclaims 305, the path of least resistance is likely to remain sideways to lower for the foreseeable future.
Happy Wednesday
-The Beat Team
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