The US March quarter profit reporting season, especially from some of the country’s major banks, starts this week, along with some important economic figures from the US and China.
Last week’s surprise profit grade from Wells Fargo sparked a 25% one day rally in US bank shares on Thursday.
Overnight Goldman Sachs reported better than expected earnings for the first quarter and plans to raise $US5 billion.
In reporting its results a day earlier than expected, Goldman said it earned $US1.81 billion, or $US3.39 a share, for the quarter ended March 31.
Reuters reported that analysts surveyed by Thomson Financial were looking for a profit of $US1.64 a share. So the result was far better than expected.
The US5 billion issue will go to repaying US government aid of $US10 billion.
Goldman shares, which have surged more than 70% during the past month, continued rising late Monday, gaining about 4.7% for the day. But they eased in after-hours trading.
Now there’s a sense of optimism around American banks, despite the weekend failure of two more regional lenders.
If Wells Fargo’s better than expected first-quarter performance is any indication, Wall Street could rally further this week on any reassuring news from three other big banks due to post quarterly results.
After Goldman Sachs reported, JPMorgan and Citigroup will follow this week. Citi on Friday in the key seeing it is the most wounded of all the surviving banks.
Good results (They have all said previously, how well the first two months of the year went, but March wasn’t so hot) will drive the current rally higher and offset any negative news from two other big reporting companies, general Electric and Intel.
General Electric’s results and outlook may shed light on the state of the broader economy and exports which continue to slump.
GE’s profit announcement will be a big test as the company has been under huge pressure this year from a falling share price, rating problems and a dividend cut.
Intel’s results will tell us a lot about the outlook for computer chips and equipment, such as phones and laptops.
The outlook has been weak. Intel is tonight, our time, GE on Friday.
Honeywell, Google, IBM, Bank of New York Mellon, CSX are among the other big US companies down to report this week, with the health care giants, Johnson & Johnson and Abbott Laboratories — kick off the reporting season this week.
Pfizer, a bigger rival, is down as possibly reporting this week as well. Healthcare in the US (and Australia) has been a defensive area for investors during the crunch.
Swiss giant, Roche, is due to release sales figures this week as well.
Good figures from this sector, and banks, could very well see the five week, 25% surge on the Standard & Poor’s 500 continue.
These companies will give us a great snap shot of the state of US business activity and the immediate outlook, though IBM has tended to rise out the storm better than most companies.
The AMP’s Dr Shane Oliver says the US analyst consensus is for a 37% fall in profits for the year to the March quarter and the ratio of negative to positive profit warnings from US companies has been running at record levels so bad results should not really be a surprise.
But he also says that "If anything with the bar set so low there is scope for the market to be surprised on the upside if results are not quite as bad as feared."
That’s a feeling coming from some of the commentary late last week after the Well Fargo result sparked an upsurge in confidence.
It forecast first quarter earnings of a record $US3 billion, thanks to low interest costs, more loans and the impact of the takeover of the Wachovia bank late last year.
As well the week ahead also sees the release of US data for retail sales, inflation, industrial production, housing starts, a couple of manufacturing surveys and a survey of home builders will be released.
Retail sales data for March will be watched closely given that recent retail sales reports have not been as weak as feared.
Last week’s same store sales figures for last month for major retailers had good and bad.
Some smaller clothing based chains did better than expected, but Wal-Mart sagged though thanks to the different timing for the Easter break this year (meaning April should be better than expected).
Target and some other major chains reported tougher conditions as well (Target’s sales were down 6.3% in the month on a same store basis). But overall the fall was smaller than expected.
March retail sales are out tonight, our time, along with the March Producer Price Index, followed by the March Consumer Price Index on Wednesday, along with the Federal Reserve’s Beige Book, a snapshot of regional economic conditions.
Weekly jobless claims, March housing starts and the Philadelphia Federal Reserve’s report on April Mid-Atlantic factory activity are all due on Thursday.
In China, after the release of March information Thursday and Friday on exports, lending and several other figures, this week sees more data on retail sales and industrial production for March and March quarter economic growth.(Thursday)
All will looked at closely to see whether the New Year bounce in most economic indicators continued.
March quarter GDP growth is probably likely to show a further loss of momentum in economic growth to around 6% from 6.8% in the December quarter as a result of weaker exports.
But Dr Oliver says this will mask a likely improvement in the quarterly pace of growth compared to the December quarter. The signs are growing that China is bouncing, but it’s all internal.
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