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Earnings season is a critical test for a stock market on the road back to a record

October 13
10:41 2020

The big banks have started third-quarter earnings season, and investors will be most focused on guidance to see if earnings can propel the market back to its highs.

The S&P 500 closed at 3,534 Monday, about 1.5% from its previous high.

Banking bellwether JPMorgan reported better-than-expected results Tuesday morning. And Citigroup and BlackRock were also reporting Tuesday, along with Delta Airlines and pharmaceutical maker Johnson and JohnsonBank of America, Goldman Sachs, Wells Fargo and PNC release earnings Wednesday.

“The bank stocks haven’t done anything in nine months. If JPMorgan is solid, and traders can’t sell it down, the banks could help take S&P to the highs of the year,” said Scott Redler, partner with T3Live.com. He said technically the market is in good shape, with Big Tech taking the lead Monday after a rest last week, but a broad group of stocks also participated in the rally.

“JP Morgan has critical range resistance at $105 to $107. If it could get above that, it could open the door for a better move in to year end,” said Redler. Its stock rose 1.9% in Tuesday’s premarket to $104.40 a share, after its earnings beat. Among the early companies to report Tuesday, Blackrock beat profit estimates, Citigroup surprised to the upside, and Johnson and Johnson third quarter earnings and revenue were also higher-than-expected.

Analysts say they are looking for much more in the way of guidance this quarter, after many companies withdrew outlooks during the pandemic shutdowns.

“There will be some companies that weathered the storm better than others, and there will be others who say it’s gotten more challenging, and we don’t know how this is going to work out,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group.

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