An epic rally of stocks faces a key test in the coming weeks as investors find out what executives expect for profits and revenue in the coming periods.
The fourth-quarter earnings season began in earnest on Friday, with better-than-expected profits from some of the nation’s largest banks. Despite a record quarterly profit at JPMorgan Chase & Co. and bright spots at Citigroup Inc. and Wells Fargo & Co., the shares of the three fell, each of Wells and Citi falling more than 6%.
The market reaction highlights the stakes as large firms begin to distribute quarterly results and, more importantly, their outlook for the coming quarters. Although the results were not terrible, the shares were hit hard, reflecting the increase in investor expectations, as the bank’s shares rose by more than 10% for 2021 in the direction of trading on Friday.
Rising major indices to new highs this year, despite an accelerated coronavirus tax and questions about how this will affect the economic outlook, underlines pressure on executives in large companies to explain how they expect to improve. The results in 2021 earnings during the S&P rise of about 70% from last March’s low were considered acceptable by investors, as many expect a sharp return this year. It is said that companies whose projections are short can expect to be punished.
“Whether they had a good quarter or not, it’s about what’s next,” said Kimberly Woody, a senior portfolio manager at Globalt Investments, which manages $ 1.9 billion. “The good news of the future has been evaluated in this market.”