Earnings season kicks off this week.
The big banks are among the first to report with JPMorgan, Citi and Bank of America all releasing results in coming days. Investors are bracing for a rough stretch as analysts anticipate a 44% drop in S&P 500 profits, the worst decline in 12 years.
How the banks report and markets react could be the key to the next leg of the rally, said Quint Tatro, president of Joule Financial. JPMorgan, in particular, could be the catalyst, he added.
“Last week, I think [JPMorgan] became very attractive from a risk-reward standpoint. So we’ll see what they say, it could be the spark that sends the market higher after the banks start reporting,” Tatro said Monday on CNBC’s “Trading Nation.”
In particular, Tatro will be watching closely for what the company says on loan loss provisions, delinquencies and any outlook on how the consumer is faring. Any positive news there could help JPMorgan and the rest of the banks play catch-up to the rally, said Tatro.
JPMorgan is set to report before the bell Tuesday. Citi and Wells Fargo are also scheduled to announce results that day. Goldman Sachs is set for Wednesday, Bank of America and Morgan Stanley on Thursday, and BlackRock on Friday.
Katie Stockton, founder of Fairlead Strategies, also sees the potential for bank earnings to propel the market rally even further.
“They’re really at a critical juncture where if they bounce from here, which appears likely from a technical perspective, they can contribute to the broader market by outperforming and exhibiting leadership, especially if the technology stocks take pause here which would be very natural after that performance that they’ve seen,” Stockton said during the same segment.
The KBE bank ETF has fallen 36% so far this year, far steeper than the 2% drop by the S&P 500.
“If we were to see the bank stocks as one group really kick in here from a relative perspective, that can be a very big market positive. Help the S&P 500 perhaps get back up to the highs,” said Stockton.
