Financial Stocks’ Earnings to Set the Tone for Markets?

U.S. Stocks were under pressure throughout the month of March as the U.S.-Iran war hit sentiment. Despite the 70% jump in Oil prices this year, the benchmark S&P 500 (SPX) made a significant rebound to recoup all of its losses since the war started as of Monday’s closing price. The resiliency for stocks is based on optimism for a resolution to the war but also for expectations of a positive earnings season.

Goldman Sachs (GS) kicked off earnings season on Monday morning and posted an earnings and revenue beat in its first quarter report, thanks to record equities trading and stronger investment banking revenues. Despite the beat, the stock fell nearly 2% yesterday as trading in its fixed income, currencies and commodities unit was $4.01 billion, well short of the $4.92 billion consensus estimate for FICC trading. With the stock up over 80% over the last year, the bar was high so maybe the slight sell-off was not surprising.

This morning, JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all reported quarterly results. JPMorgan reported Q1 EPS $5.94 versus a consensus $5.51and revenue of $49.8B and managed revenue $50.5B versus the expected $48.9B. Strong performance in investment banking and markets – both up 20% with average loan growth of 11% year-over-year. The stock was down slightly post results as the bank lowered its guidance for full-year 2026 net interest income, a key driver of bank earnings, from the previous $104.5 billion to about $103 billion. Investment banking fees jumped 28% to $2.88 billion, or about $260 million more than expected, on higher mergers advisory and stock underwriting fees. Another factor helping the bank top expectations in the quarter: it set aside less money for loan losses than analysts had anticipated.

Jamie Dimon, Chairman and CEO, commented: "The Firm delivered strong results in the first quarter, reporting net income of $16.5 billion." Dimon continued: "Performance was strong across our businesses. Dimon added: "The U.S. economy remained resilient in the quarter, with consumers still earning and spending and businesses still healthy. Dimon cited "significant" risks, including geopolitical tensions, energy market volatility, and persistent inflation, causing cautious sentiment despite strong results.

Wells Fargo (WFC) stock is also down slightly this morning. Wells Fargo showed mixed results: a 15% increase in EPS to $1.60 and revenue growth to $21.45 billion. While beating profit expectations, the revenue fell slightly short of analysts' estimations. Chairman and Chief Executive Officer Charlie Scharf commented, "We saw continued positive impacts from the investments we have been making with diluted earnings per share increasing 15%, revenue increasing 6%, loans increasing 11%, and deposits increasing 7% compared to a year ago. Revenue growth was driven by both a 5% increase in net interest income and an 8% increase in noninterest income.

JPM, WFC and GS stocks all hit all-time highs this January so expectations for earnings were elevated going into the reports. The overarching theme is one of solid, resilient performance that managed to surpass expectations despite significant macroeconomic volatility. The banking sector has shown remarkable ability to navigate complex conditions—including geopolitical tensions (Iran) and AI-driven market changes—by delivering solid, albeit moderating, profits. However, the market remains cautious about the rest of 2026, focusing more on forward guidance than past results. It’s been a solid start to earnings season from the financial sector but can that spread to the broader market amid all of the macroeconomic headwinds?!

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