News & Analysis

Weekly Summary – Earnings Season

July 19, 2019

By Deepta Bolaky

Weekly Summary 

Earnings Season

Investors were bracing for the second-quarter earnings season this week. The following major companies released their quarterly figures this week.

Goldman Sachs Group Inc:

Goldman Sachs beats revenue expectations with $9.46bn in the second quarter. The substantial boost in equities trading compared to a year ago compensated for the slight reduction in fixed income, currency and commodities revenue. In comparison with the first-quarter revenue, the bank attributed the beat to better market conditions.

As of writing, its share price was up at $214.52.

JPMorgan Chase & Co:

JP Morgan also posted an earnings beat of $9.65bn, which is 16% higher than a year earlier, but its forecast on the net interest income disappointed. The largest US bank sent warnings that lending income will fall in the second half of the year.

The company’s share price rose on upbeat revenue but retreated slightly on concerns on the forecasts of interest income. It is currently trading at $114.67.

Netflix Inc:

Netflix was the first among the FANG group to report its quarterly updates. Profit in the second quarter of 2019 fell to $271m. New paid memberships grew only by 2.7 million compared to 5 million forecasted.

The company’s share price tumbled by more than 10% on Thursday to trade lower at around $325.21.

Federal Reserve

Amid a series of Fed’s speeches across the week, Fed’s Williams Speech was the highlight of the week. The influential policymaker discussed the “zero lower bound” and the need to take “preventive measures than to wait for disaster to unfold”.

After the Living Life Near the ZLB speech, there were rising expectations of aggressive rate cuts, which lifted the stock markets towards the end of the week. Equity bulls pushed major US indices higher on Thursday.   

Economic Releases

US data

The data released across the week were mixed for the US economy. On the downside, Industrial Production came at 0.0%, which shows that production had stagnated in the month of June. The economic reports on the housing sector were also disappointing. Building Permits and Housing Starts came below expectations at 1.253M and 1.220M respectively.

On the upside, Retail Sales beat estimates at 0.4%, and Philadelphia Fed Manufacturing increased from 0.3% to 21.8, which shows that conditions have significantly improved in this sector.

Chinese data

The economic releases in China this week either matched expectations or beat estimates.

  • Retail Sales was strong at 9.8% compared to the 8.3% expected.
  • Industrial Production rose to 6.3% in June.
  • GDP y/y matched estimates at 6.2% while GDP q/q was higher at 1.6%.

Trade Tariffs 

We started the week with some negative trade comments coming from the US. Trump tweets on the progress of a trade deal caused the markets to pause the recent rally and seek safety with safe havens.

On Thursday, it was reported that the US and Chinese officials spoke on the phone. No details on what was discussed were made public. However, it helped the markets to find some support on the fact that talks are ongoing and have not stale.

Monday, 22 July 2019
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