To The Moon

On Friday, April 14, four of the largest financial institutions in the U.S. with a combined market cap of more than $700 billion will announce their first-quarter results: JPMorgan Chase & Co, Wells Fargo & Co, BlackRock Inc, and Citigroup.

The banks releasing their results this week account for about 15% of the Financial Select Sector SPDR Fund XLF, the benchmark of the U.S. financial sector. As a result, the financial sector and perhaps the broader market, as represented by the S&P 500 index, are expected to see significant price actions in response to banks' quarterly results.

We're both ready for the bank run!

Investors are keen to see how big financial companies responded to the regional banking crisis that occurred in early March.

Let's take a closer look at the analysts' consensus estimates for each of these financial institutions, as well as predicted profits and sales growth compared to past quarters.

JPMorgan Chase & Co.

Wall Street analysts have settled on a consensus estimate of $3.34 EPS in the first quarter. This would imply a decline from the previous quarter's reported EPS of $3.57, but an increase from the reported EPS of $2.63 in the first quarter of 2022. In the previous two quarters, JPM has outperformed analysts' earnings predictions by 8% in the third quarter of 2022 and by 16% in the fourth quarter of 2022.

The projected quarterly revenue is $36.1 billion. That would mark the company's best-ever quarterly revenue, up $1.5 billion from the fourth quarter of 2022 and $5.5 billion from the first quarter of 2022.

As of April 11, JPMorgan Chase & Co. traded at $127.9 per share, down 5% year-to-date.

The company's average analyst price target is $152.4 per share, which is 19% higher than current market levels.

Wells Fargo & Company

First-quarter EPS for Wells Fargo is predicted to be $1.16 by the Street consensus. This would imply a sharp increase from both the previous quarter's reported EPS of $0.85 and last year's first quarter reported EPS of $0.88. Wells Fargo's most recent earnings report for the fourth quarter of 2022 surprised analysts' EPS expectations by 14%, although it missed EPS forecasts by 22% in the third quarter of 2022.

Quarterly revenues are estimated at $20.1 billion. That would mark the company's best quarterly revenue since the fourth quarter of 2021, up $500 million from the fourth quarter of 2022 and $2.5 billion from the first quarter of 2022.

As of April 11, Wells Fargo & Co. traded at $39.19 per share, down 5.8% year-to-date.

The company's average analyst price target is $49.76 per share, which is 27.3% higher than current market levels.

BlackRock, Inc.

First-quarter EPS for BlackRock is predicted to be $7.72 by the Street consensus. This would imply a slowdown from both the previous quarter's reported EPS of $8.93 and last year's first quarter reported EPS of $9.52. In the previous two quarters, BLK has outperformed analysts' earnings expectations by 35.2% in the third quarter of 2022 and by 9.9% in the fourth quarter of 2022.

Quarterly revenues are estimated at $4.25 billion. That would be a reduction from fourth quarter 2022 revenues of $4.34 billion and first quarter 2022 revenues of $4.7 billion.

As of April 11, BlackRock traded at $664.87 per share, down 7.7% year-to-date.

The company's average analyst price target is $794.81 per share, which is 19.75% higher than current market levels.

Citigroup, Inc.

First-quarter EPS for Citigroup is projected to be $1.68 by the Street consensus. This would imply an increase from the previous quarter's reported EPS of $1.16, but a slowdown from last year's first quarter reported EPS of $2.02. In the previous eight quarters, Citigroup has always outperformed analysts' earnings expectations. In the third quarter of 2022, the company beat Street's EPS estimates by 14.5%, and by 1.4% in the fourth quarter of 2022.

Quarterly revenues are estimated at $20.06 billion. That would mark the best-ever quarterly revenue for the company, up by $2 billion from the fourth quarter of 2022 and by $0.7 billion from the first quarter of 2022.

As of April 11, Citigroup traded at $46.83 per share, up 2.4% year-to-date.

The average analyst price target for Citigroup is $55.33 per share, which is 17.79% higher than current market levels.

The founder and CEO of Market Structure Edge, Tim Quast observed that investors are presently "more long" Wells Fargo & Company (NYSE:WFC) and JP Morgan Chase & Co. (NYSE:JPM) than they are Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) after analyzing the most recent supply and demand trends.

Other than Bank of America (NYSE:BAC), where the supply volume is shifting to the upside with demand peaking, the latest supply trends indicate that investors are generally lowering their short bets on major U.S. banks.

"No one knows supply and demand better than market makers," Quast observed.

Gains result from a combination of increased demand (for longs) and declining supply (for shorts), which is what we have so far observed in the broad market, as represented by the SPDR S&P 500 Trust ETF (NYSE:SPY), over the past weeks. Demand has increased while supply has decreased from 52% to 50%.

Hard or soft landing?

Where exactly are we going now? Next week, smack in the middle of earnings season, options will expire, which could pose some volatility, according to the expert.

With demand decreasing and supply rising, a reversal may be in the cards, because traditionally that's what has happened when broad market sentiment was this strong. “If I were betting, I would bet that the market decline," Quast said.

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