With nothing on the U.S. economic calendar today, the spotlight will remain on earnings reports. Beyond the U.S. shores, the Chinese central bank acted as expected by raising reserve requirements and the European debt issues were again in the news. Today’s encouraging earning reports may get drowned out by the noise coming out of Europe, keeping stocks under pressure.
On the earnings front, we had Citigroup (C), Eli Lilly (LLY) and Halliburton (HAL) reporting results today. Lilly beat EPS and revenue expectations, while Halliburton missed modestly. Citi beat on EPS, but revenue was lower than expected.
As we saw with J.P. Morgan (JPM) and Bank of America (BAC) last week, Citi’s results benefited from improving credit quality and the resulting lower provisioning. On the positive front, Citi did have some retail loan growth, particularly in Latin America. This is different from what we saw with JPM and BoA, where the only positive on the loans front was on the commercial side.
But these improving signs are not strong enough to generate adequate top-line growth. As such, banks will likely continue ‘milking’ their reserves for bottom-line boost in the coming quarters. Results from these three banks have set the tone for the financial results on deck in the coming days.
There is nothing new on the European debt story; just renewed concern that Greece’s debt may need to get ‘restructured’ to make that country’s financial profile more viable. It is difficult to envision a resolution of the debt problem without some pain for the bond holders, but that’s how the EU/IMF plan has been proceeding thus far. European leaders are trying to protect their banks, who are the largest holders of debt from Greece and the other indebted nations, without acknowledging it.