Goldman Sachs & JP Morgan Lead The Way In Second Quarter Bank Earnings

Sentiment in the market currently is humorously mixed. TV pins "bubble" proclaimers against "stocks are fairly valued" advocates on a near daily basis.  

The Dow Jones Industrial Average has fallen for the past three sessions and participants are clearly shook.  In the past week, consensus estimates for Q2 2014 EPS and Growth rates have reversed, with growth spiking from six percent to eight percent according to Capital IQ.  Financials, which performed terribly last quarter, sparked the bull case for Q2.  

The Global Markets Intelligence teams says:

"As the peak season got into full swing, and a number of big banks...reported impressive beats on the top and bottom line, the growth rate incrementally began to pick up".

The banks reporting impressive beats were (earnings images courtesy of Benzinga Pro):

JP Morgan JPM

Citi Group C

Goldman Sachs GS

Morgan Stanley MS

Thus far for Q2 earnings we have seen 229 companies in the S&P 500 report earnings.  Of those 229, 155 have reported earnings above expectations.  The entire index has collectively reported a 7 percent EPS surprise.  Only nine companies have reported earnings above 100 percent.  Capital IQ has produced two tables highlighting the Top Ten companies for expected EPS growth/declines for Q2:

Top Ten Companies With The Largest YoY Actual EPS Growth For Q2 2014 

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Top Ten Companies With The Largest YoY Actual EPS Decline For Q2 2014 

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The downward growth trend shown above hasn't stopped asset prices from rising.  Benzinga previously covered how returns are based of metrics and not organic earnings growth.  

Though there may exist the possibility to squeeze out Alpha from the equity market over the next couple weeks, traders should note the acceptance from Goldman that the "economic expansion" they were waiting for failed to show up which caused the bank to downgrade equities to Neutral on Friday.  

The expectation for the FED to taper entirely before November and also raise rates in H1 2015 is causing the market to become skittish and all participants ought to be on watch for sentiment to turn negative at a moments notice.