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Written by Samuel Buddy-Wiseman Barker & Steven Klos
Summary
Major North American Indices closed the week off with record highs after President Donald Trump officially signed “phase one” of the trade deal. Terms of the deal included a commitment from China to increase spending on manufactured goods, energy, agricultural products, and services totalling $200 billion over the next two years. The signing of the deal removes some uncertainty in the market however future trade issues will likely drive market volatility. The DJIA, S&P500, Nasdaq, and TSX are up 20.26%, 26.46%, 33.74%, and 14.6%, respectively, over the past twelve months. US housing starts accompanied by solid retail numbers sparked confidence in the economy, with housing starts up 17% in December to hit a thirteen-year high. Record-low unemployment and strong job growth are equipping consumers to drive the economy and ease worries of a possible recession. Technology, Telecom, and healthcare sectors led the gains, strongly supported by Alphabet Inc. who joined the trillion-dollar club on Friday. Energy, Materials, and Industrial sectors continue to drag on the markets, despite having extremely fair fundamental valuations compared to other high-growth sectors.
Earnings Spotlight
The largest US financial institutions posted impressive earnings to close out 2019. JP Morgan (NYSE: JPM) lead the pack with the highest earnings in the history of any US bank, posting a net income of $36.4 billion. They also posted a $2.57 EPS, which was above the $2.32 street estimate. This was largely attributed to fixed-income market revenue growth, which was up 86% from the previous quarter. Bank of America (NYSE: BAC) benefited from strong trading and investment banking numbers, which drove fourth-quarter earnings up to $0.74 per share versus the $0.68 per share that was predicted. Citigroup (NYSE: CITI) also posted strong quarterly earnings with strength in their consumer banking, investment banking, fixed-income trading and market revenue segments. They reported a $1.90 EPS, slightly more than the $1.82 EPS street consensus. The general guidance from the banks looking into 2020 is modest compared to last year but remains bullish.
Upcoming Earnings
Netflix (Nasdaq: NFLX) is set to report earnings on Tuesday, January 21 at 6 p.m. ET, analysts are expecting a $0.52 EPS, and $5.5 billion in revenue in the fourth quarter. A key metric to watch for is how much Netflix was able to grow its subscribers in international markets, as it is essential for their scalability. Analysts predict 7.2 million international subscribers despite guidance from last quarter’s earnings call that initially suggested 7.6 million.
Rogers Communications (TSX: RCI/B) is the largest Canadian company set to report earnings this week expecting revenues of $3.9 billion with a $1.02 EPS. The report will come on January 22 before the market open. Last Thursday the company announced plans for rolling out their 5G network across 20 different Canadian regions. Analysts will be looking for more details on these projects as well as the relevant capital expenditures associated with developing the infrastructure necessary to support a 5G network.
