Financials continue to shine on Wall Street on July 16
Financial-sector companies such as Citigroup (C) and Blackstone Group (BX) glittered on Wall Street on July 16, after their earnings reports for the fiscal quarter ended June 2015 beat estimates. Citigroup gained 3.77%, while Blackstone was up 1.52%. XLF gained 0.99%, compared to SPY, which was up 0.80% on July 16’s close. However, Goldman Sachs (GS), which also came out with a positive earnings report for Q2, was down 0.84% on July 16’s close. Overall, the US stock market was uplifted by positive earnings reports.
Citigroup (C) reported $1.45 in EPS (earnings per share) against the $1.35 expected by Wall Street experts. Blackstone (BX) reported $0.43 in EPS against the expected $0.52, while Goldman Sachs (GS) exceeded market expectations of $3.70 in EPS by reporting $4.75 for Q2.
The financial sector is catching up
The US financial sector is definitely catching up. While the broad-market SPDR S&P 500 ETF (SPY) has returned 3.27% so far this year, the financial sector, as tracked by Financial Select Sector SPDR ETF (XLF), has been able to yield 2.95% during the same period. Companies in the financial sector have been able to deliver these returns despite the currency war eating up their margins in foreign countries. See US Banks Among the First to Fall to the Currency Wars.
Expectations of a rate hike are fueling financial-sector stocks
Financial-sector stocks have been gaining lately, solely on the expectations of a rate hike soon. Banks’ margins are tied to interest rates. A rise in interest rates should bolster US banks’ margins. So the sooner the rate hike, the better for banking stocks.
However, the probability of a rate hike continues to hinge on sustained positive economic data. There were some key economic indicator releases in the United States on July 16. Labor market, consumer sector, and industrial sector indicators all play a pivotal role in the Fed’s decision-making. Let’s take a look in the next part of this series.