Companies reporting results in coming weeks are under heightened pressure to spell out how their performance in 2021 is likely to justify share-price gains notched during an epic stock-market rally.
A first round of big-bank results late last week highlighted the challenge. JPMorgan Chase & Co. reported a record quarterly profit and there were bright spots at Citigroup Inc. and Wells Fargo & Co. Still, shares of all three declined, with Wells and Citi each dropping more than 6%.
Corporate executives face rising investor expectations going into the fourth-quarter earnings season that the economic outlook would soon brighten despite an accelerating toll from the coronavirus. Bank shares had climbed more than 10% for 2021 heading into Friday’s trading.
“Whether they had a good quarter or not, it’s all about what’s next,” said Kimberly Woody, senior portfolio manager at Globalt Investments, which manages $1.9 billion. “Good future news has been priced into this market.”
That is a big change from recent months. During the S&P 500’s roughly 70% rise from last March’s intraday low, investors had deemed soft earnings acceptable. That was because they expect a sharp rebound this year—and had priced shares accordingly.
