An epic stock recovery faces a key test in the coming weeks, as investors learn what executives expect from earnings and revenues in the coming periods.
The fourth-quarter earnings season began on Friday with better-than-expected earnings from some of the country’s largest banks. Despite record quarterly earnings at JPMorgan Chase & Co. and some good points at Citigroup Inc. and Wells Fargo & Co., shares in all three fell, with Wells and Citi falling more than 6%.
The market reaction highlights the risks as large companies begin to share quarterly results and, more importantly, their outlook for the coming quarters. Although the results were not dire, stocks were hit hard, reflecting rising investor expectations, as banks’ shares rose more than 10% in 2021 toward Friday’s trading.
The wave of big indices for new hikes this year, despite the accelerated coronavirus tax and questions about how it will affect economic prospects, highlights the pressure on executives at large companies to explain how they expect results to improve in 2021. Soft profits during the S&P increase of around 70% over last March’s intraday low were considered acceptable by investors because many expect a sharp recovery this year. Companies whose projections are insufficient can expect to be punished, they say.
“Whether they had a good quarter or not, what matters is what lies ahead,” said Kimberly Woody, senior portfolio manager at Globalt Investments, who manages $ 1.9 billion. “Good future news has been quoted in this market.”