This week, several banks will post quarterly earnings. JPMorgan Chase (JPM) and Wells Fargo (WFC) will post results first. On Wednesday, Citigroup (C) and Goldman Sachs (GS) will report results. On Thursday, Morgan Stanley (MS) and B of A (BAC) will issue their report.
On Thursday, UnitedHealth (UNH) is the company to watch. Investors dumped the stock after worries grew about its insurance denial rates. UNH stock still trades at a premium, with a forward P/E of 18.85 times. Its dividend yield is 1.61%, which does not give shareholders much cushion.
The bank stocks need to post outsized margin expansion to win shareholders. Investors reduced their position in the sector last month. They are expecting the Fed Funds rate to stay the same. The central bank cannot cut interest rates until inflation slows. That will not happen when the U.S. plans to add tariffs. In addition, the U.S. economy hired more workers in December.
Last month, the retail sector hired more staff to deal with the holiday season. Even though firms like Best Buy (BBY) may cut staff during the slower retail period, investors do not care. They look at the strong job report as a reason for the Fed to delay any cuts.
