Financial Institutions' Shares Fall Ahead of Earnings Amid Expectations of Unpleasant Surprises

Financials shares fell ahead of earnings, with traders bracing for unpleasant surprises. Investment banks like Goldman Sachs, Morgan Stanley, and Citigroup are set to post strong results due to trading profits from April's tariff shock. JPMorgan shares, the largest US bank by assets, fell 3% this week.

Financial markets experienced a mixed week, with significant movements in stock prices ahead of the upcoming earnings season. U.S. stocks, particularly tech-heavy indexes like the Nasdaq, pulled back slightly after reaching all-time highs, reflecting a cautious stance among traders [1]. The S&P 500 closed 0.3% lower, following two consecutive weekly gains, while the Dow Jones Industrial Average and the Nasdaq composite also saw modest declines [1].

The market's unease was driven by several factors. The Trump administration's escalation of tariffs against trading partners like Canada, along with potential new tariffs on pharmaceutical drugs and copper imports, has continued to cast a shadow over the market [1]. Despite the uncertainty, the market has shown resilience, with many analysts suggesting that the current "base case" of 10% tariffs has been priced in [1].

The focus is now shifting to the earnings season, with several key companies set to report. Netflix (NFLX) shares traded lower ahead of its second-quarter earnings report, despite analysts raising their price targets [2]. The stock has been relatively insulated from tariff shocks, but investors are closely watching the company's ability to build on its strong first-quarter performance [2].

In the semiconductor sector, TSMC (2330.TW, TSM) and Dutch company ASML (ASML.AS, ASML) will be closely watched, given their roles as bellwethers for the global chip industry [3]. Meanwhile, major U.S. investment banks like Goldman Sachs (GS), Morgan Stanley, and Citigroup are expected to post strong results, driven by trading profits from April's tariff shock [3].

Investors are also keeping an eye on JPMorgan Chase (JPM), the largest U.S. bank by assets. The stock fell 3% this week, but the market remains optimistic about its earnings potential [3].

Overall, the market is bracing for a period of uncertainty as earnings season begins, with traders and analysts closely monitoring the results of key companies and the broader economic landscape.

References:
[1] https://finance.yahoo.com/news/asian-shares-mixed-wall-street-044502105.html
[2] https://www.benzinga.com/trading-ideas/movers/25/07/46357194/netflix-stock-dips-ahead-of-q2-earnings-despite-analyst-optimism
[3] https://uk.finance.yahoo.com/news/goldman-sachs-netflix-tsmc-asml-burberry-stocks-to-watch-113513208.html