By Ben Fox Rubin
Major banks and tech companies are set to kick off earnings
season next week, including Goldman Sachs Group Inc. (GS), Bank of
America Corp. (BAC), Google Inc. (GOOG) and Yahoo Inc. (YHOO).
Meanwhile, market data reports could continue to face delays
amid a partial shutdown of the federal government.
Rocky Times Ahead for Banking Sector
The third quarter could be a bruising one for large financial
institutions.
Among the troubles piling up for U.S. banks include warnings of
weak trading revenue, a sharp decline in mortgage-refinancing
activity and rising legal costs.
A stark example of that last factor is J.P. Morgan Chase (JPM),
which released results this Friday and said $9.15 billion in legal
expenses caused the bank to post its first-ever loss under Chairman
and Chief Executive James Dimon. Also Friday, Wells Fargo & Co.
(WFC) fared better thank to improving consumer credit, though
refinancing activity--a recent bright spot for banks--was sharply
lower as interest rates continue creeping higher.
Analysts have scrambled to cut their estimates ahead of results
and have trimmed revenue expectations for the six largest U.S.
banks during the quarter and cut profit estimates for all but Wells
Fargo.
Poor results could prompt additional job cuts and worsen the
already downcast mood on Wall Street.
The tempered expectations are a troubling sign for an industry
already struggling to overcome lackluster loan demand, a weak
economy and the hangover from the 2008 financial crisis, as
regulators and government investigators work through a backlog of
cases focused on banks' activities during the housing downturn.
Financial firms set to report include Goldman Sachs Group Inc.
(GS), Bank of America Corp. (BAC), Citigroup Inc. (C) and Morgan
Stanley (MS), among many others.
Mobile at Center Stage for Internet Firms
Mobile expansion will be the key element many investors will be
watching for in major Internet companies' results.
EBay Inc. (EBAY) last month made a big push into the mobile
sector with its deal to buy payment service Braintree Payments
Solutions LLC for $800 million. The acquisition will give eBay's
PayPal unit lucrative transaction fees from Braintree's expanding
network, which currently processes more than $12 billion in
payments annually--a third of which come from mobile
devices--helping PayPal's goal of drawing more revenue from
smartphone and tablet users. Overall, eBay's third-quarter revenue
is expected to continue improving.
Meanwhile, Yahoo Inc. (YHOO) has redesigned many of its mobile
apps and now has hundreds of engineers dedicated to developing
services for mobile devices, up from dozens of engineers before CEO
Marissa Mayer was hired last summer. Despite Ms. Mayer's turnaround
efforts, the company is expected to post weaker results in the
latest quarter, illustrating the challenges the Internet pioneer
still needs to tackle.
Google Inc. (GOOG) has struggled to stem the decline in its
search-ad prices, as mobile ads--which command lower prices than
those on desktop computers--have weakened the company's ad revenue
as more users access Google's services on mobile devices.
Regardless, Google is expected to keep up its track record of
strong quarterly revenue growth, thanks to its dominant position in
Internet search.
Other major tech names scheduled to report next week include
International Business Machines Corp. (IBM) and Intel Corp.
(INTC).
Industrials, Healthcare, Consumer Products and More
There will be plenty more big names reporting amid the start of
earnings season, with a focus on industrial conglomerates, health
sector stocks and consumer products companies.
Industrials General Electric Co. (GE), Honeywell International
Inc. (HON) and Schlumberger Ltd. (SLB) are all slated to report on
Friday.
Healthcare companies reporting next week include medical-device
makers Johnson & Johnson (JNJ), St. Jude Medical Inc. (STJ) and
Stryker Corp. (SYK), as well as insurer UnitedHealth Group Inc.
(UNH).
Also, consumer products giants Coca-Cola Co. (KO) and PepsiCo
Inc. (PEP) report next week.
Shutdown Causing Market Data Delays
The economic calendar continues to be corrupted because of
reports postponed by the government shutdown. Some data, however,
will see the light of day in the upcoming week.
Factory reports from two district Federal Reserve banks are on
tap next week. Economists surveyed by Dow Jones Newswires expect
slower expansions in both regions.
The National Association for Home Builders will release its
survey of building conditions in October. The housing market index
is projected to slip to 57 from 58 in September. Higher mortgage
rates are probably slowing new home sales.
The Fed will release its beige book on Wednesday. With little
economic data being released during the shutdown, policymakers will
have to assess the economy by relying on the anecdotes contained in
the book. The book is being prepared in advance of the Fed's
October 29-30 policy meeting.
IPOs Expected to Include Veeva, Springleaf
Software firm Veeva Systems Inc. is expected to launch its
initial public offering next week, looking to raise up to $270
million.
The company, founded in 2007, provides cloud-based software for
pharmaceutical and other life-sciences companies. As of Aug. 31,
Veeva served about 170 life sciences customers. The IPO proceeds
will be used for working capital and other general corporate
purposes.
Subprime lender Springleaf Holdings Inc., which has more than
800 branches and an Internet business called iLoan, is also
expected to start trading publicly.
-Kathleen Madigan contributed to this report.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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