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Wednesday, July 18, 2012

Will Q2 Earnings Lift or Sink the Marketplace?

The Goldman Sachs Tower. New Jersey
The Goldman Sachs Tower. New Jersey (Photo credit: luismontanez)
Here's a summary of Q2 2012 earnings season thus far: The reports, from the financial sector to utilities (XLU - News), absolutely stink. In fact, negative to positive earnings guidance for S&P companies (SPY - News) for Q2 is the worst since the Financial Crisis in 2008. Before we get into the gory details, let's look at just one of the industry sectors that was supposed to "lead" earnings growth; financials.
Financials The hot performance of financial stocks (XLF -News) belies their real life lackluster Q2 earnings results and deeper problems within the sector. Goldman Sachs (GS - News) reported an 11% fall in second quarter profit and its $16.6 billion of revenue during the first six months are 14% lower from last year. Goldman's corporate earnings declined to their lowest level since 2005. Their return on shareholder equity also declined. More worrisome, is the lingering habit of financial/banking stocks to blindside shareholders with nasty and unwelcome surprises. JPMorgan Chase (JPM - News) is dealing with a massive trading loss that could top $6 billion and possibly be as high as $9 billion.  JPM posted a 7% decline in profits compared to a year earlier. Question: If a bank posts a one-time loss next quarter in addition to the latest quarter's losses, does that make it a two time loss or a one-time quarterly loss twice?  ... Continue to read.
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