I don’t want to keep hammering on the same point here, but it was quite interesting to watch the market action today.
The S&P 500 climbed to its highest level early this morning on several positive pieces of global news:
- Europe has been doing pretty well in light of the Standard & Poor’s downgrade of several eurozone countries. The downgrade failed to hurt the eurozone’s debt markets, and stocks there have remained resilient.
- China’s GDP came in at an annualized 8.9%, ahead of expectations of 8.7% growth. The news erased fears that the country may be heading for a hard landing and sent global markets higher.
- And here in the U.S., most of the economic numbers show an economy that continues to pick up steam—albeit with a few bumps on the road to recovery.
However, midway through today’s session, the market pulled back from its gains as Citigroup (C)’s steep earnings drop weighed on investors.
Citigroup finished the day down 8.1% after it reported weaker-than-expected earnings despite a pickup in lending and a drop in bad loans. Total revenue fell 7% and profits dropped 11% for the bank—largely as a result of a big decline in the bank’s trading operations.
As I have discussed several times this year—the banking sector looks tempting, especially as it started off the year with a bang and analysts fell head-over-heels explaining why banking stocks were finally returning to favor.
However, earnings are where we separate the winners from the losers, and right now banks are very clearly coming in as the losers.