Major Financials Kick Off Earnings Season Tomorrow

Earnings season begins anew this week, with major financial companies leading the charge as per usual against a backdrop of a broader market that saw sharp gains after the U.S.-Iran war ceasefire making for an easing – though still tense – geopolitical framework. U.S. and Iranian diplomats are meeting in Islamabad, Pakistan during the weekend to continue these negotiations, while Israeli and Lebanese representatives will meet in Washington, D.C. this week to discuss deescalation in their own conflicts. Traders likely will be closely watching these situations for clues about the market’s trajectory this week.

In terms of performance of major equity indices on the week, the S&P 500 (SPX) closed down -0.11%, the tech-focused Nasdaq 100 (NDX) gained +0.14%, and the small-cap Russell 2000 (RUT) was down -0.22%. Crude oil (/CL) was one of the most notable movers, with futures plunging -14.38% on the week after the reopening of the critical maritime chokepoint of the Strait of Hormuz.

As for notable earnings, Goldman Sachs (GS) will kick things off in tomorrow’s premarket along with Fastenal (FAST). Big banks continue to be the focus on Tuesday, with JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Blackrock (BLK) all reporting before the open, along with healthcare giant Johnson & Johnson (JNJ).

Wednesday morning’s financial earnings include Bank of America (BAC), Morgan Stanley (MS), Progressive (PGR), and PNC Financial (PNC); meanwhile, ASML Holding (ASML) will give insights into the crucial semiconductor sector at that same time.

Thursday’s headliner is the biggest name of the week in terms of market cap with a figure of around $1.7 trillion, and perhaps the most impactful of all – Taiwan Semiconductor (TSM), a foundry that produces more than 90% of the world’s advanced computer chips. Thursday’s financials take a backseat to heavyweights such as Netflix (NFLX), PepsiCo (PEP), and Abbott Labs (ABT), but regional banks start coming into focus here with Bank of New York Mellon (BK), U.S. Bancorp (USB), and Citizens Financial Group (CFG) among others. All these names report in the premarket with the exception of Netflix.

Finally, Friday’s earnings action once again focuses on regional banks with names like Truist Financial (TFC), Fifth Third Bancorp (FITB), and Regions Financial (RF) to round out the week.

Given the heavy emphasis on financial earnings this week, traders may be looking toward the State Street Financial Sector ETF (XLF) for a bird’s eye view of the big banks as an overall group. The XLF saw a sharp bounce alongside the broader market in recent weeks after bottoming out at 47.67 on Mar. 27 for a +2.66% rally, particularly the 2.6% upside gap on April 8. The upside move broke through a downward channel that began with the all-time highs of 56.52 on Jan. 6, but shares paused just above the 51 area that marks a series of repeated lows from June to November.

Examining options activity for the XLF heading into this onslaught of financial earnings, the market shows a potential expected move of about +/-1.4, or roughly 2.8%, for the Apr. 17 monthly expiration. The next monthly expiration for May 15 comes in at around +/- 2.8, approximately 5.6%. 

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