Wednesday, July 24, 2013

The Dominance of the Financials

The results from second-quarter earnings season have been fairly good so far, with more than 70 percent of reporting companies exceeding Wall Street's estimates. But almost all of the earnings growth is coming from one corner of the economy: financial institutions.

As the Wall Street Journal reports, six big financials - JP Morgan, Bank of America, Citigroup, Capital One, Goldman Sachs, and Wells Fargo - make up more than 80 percent of the S&P 500's second-quarter profit growth. Altogether, the financial sector is expected to show 26 percent profit growth this quarter, while the S&P 500 as a whole is expected to show just 3.3 percent growth.

Zooming out from the financials, just 20 companies within the S&P 500 are on track to produce nearly 35 percent of the index's total earnings, according to the Journal. The biggest contributors to those earnings outside the financial category: Johnson & Johnson, IBM, and Exxon Mobil.

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