Second quarter earnings will begin with stocks reaching for new highs. Following a post-Brexit selloff, stocks have mostly returned to stable levels and are gaining even more momentum as Brexit factors appear to be mainly isolated to the U.K.
During the week of July 15, JPMorgan (JPM, Financial), Citigroup (C, Financial) and Wells Fargo (WFC, Financial) will report earnings with a preview of what to expect from the banking sector overall in the second quarter. Positive reports from the banking sector this week could significantly help stocks rally. The outlook for the sector appears to be positive after all 33 reporting banks passed the first round of annual Federal Reserve stress testing and 31 of 33 banks passed the second round. The 31 banks passing the second stress test were approved for share buybacks and dividend increases, which is expected to help share prices in the near term. The chart below provides detail on share buybacks and dividend increases expected from some of the large banks.
Year-to-date banking stocks have been struggling, and many market investors are suggesting that they may be poised for significant gains given the momentum from a market rally combined with the positive capital reports and recent market selloff.
According to Yahoo! (YHOO, Financial) Finance estimates for the second quarter, analysts are expecting the following this week from the three large banks:
JPMorgan
- Year-to-date return: -5.36%.
Citigroup
- Year-to-date return: -17.76%.
Wells Fargo
- Year-to-date return: -11.23%.
In a CNBC report Monday, market specialist, Jeff Harte of Sandler O'Neill had the following insights on factors affecting bank earnings and stock valuations.
Disclosure: I do not directly own any shares of any stocks included in this article.
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