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The big banks kick off third quarter earnings reports tomorrow, Tuesday, October 13 with JPMorgan Chase (JPM) due to report before the open. The analyst consensus is that the bank will earn $1.93 a share, down from the $2.68 a share earnings in the September quarter of 2019. Citigroup (C) is also scheduled to report that day with analysts projecting earnings for the quarter of 78 cents versus $1.98 a share in 2019.

The whisper number on JPMorgan Chase has been moving up lately. (The whisper number is an estimate of the informal late minute estimates being passed among analysts.) To me, it looks like Wall Street thinks JPMorgan Chase with its big trading and fixed income units will pull a earnings surprise out of its hat. If I were thinking to short a bank stock ahead of earnings tomorrow, it wouldn’t be JPMorgan Chase.

In contrast the whisper number for Citigroup is almost dead on the official analyst consensus.

Bank of America (BAC) will follow before the open on Wednesday, October 14, with analysts projecting earrings of 44 cents a share versus 75 cents in 2019. (The whisper number here is 2 cents a share above the consensus.)

Wells Fargo (WFC) also reports that day with analysts projecting a huge drop to 39 cents a share from 92 cents in 2019. The whisper number right now says that the consensus is right on.

Morgan Stanley (MS) is scheduled for Thursday ($1.15 a share projected versus $1.21 in 2019) and Goldman Sachs (GS) leads off the following week (on October 20, ) with analysts projecting $4.04 a share versus $4.79 a share in the third quarter of 2019.)

The whisper numbers for both Morgan Stanley and Goldman are substantially above the consensus–almost 10% higher for Goldman and more than 15% higher for Morgan Stanley. Which supports my thoughts that Wall Street is expecting more trading revenue and income beats from these big banks.

Bank earnings will be important for reasons that extend beyond the sector.

First, they will help set the tone for the rest of earnings season if they either beat or miss analyst projections. Last quarter the big trading banks–all of these with the exception of Wells Fargo–beat projections on huge revenue surges in their trading operations. That helped relieve some of the market’s anxiety about the the quarter. There’s a good chance that at least a few of these big trading banks will do it again.  I’d look to see, however, if these banks are reporting deterioration in quality of their credit card and loan portfolios and if they are adding to reserves in anticipation of further declines in credit quality and upticks in defaults and delinquencies.

Second, recent weeks have been rather sparse in guidance from companies on this quarter–and even more so on the quarter that ends in December. Wall Street will be looking to see if, 1) these banks make any forecasts at all for fourth quarter earnings, and 2) what the direction of that guidance might be. A lack of guidance will make markets nervous. Cuts to guidance for the remainder of the year will cause some investors and traders to hedge or to pull money out of the markets–in all sectors–entirely.

Third, there’s not much time left even for companies who report later than these banks do to issue new guidance for this quarter and for the fourth quarter. My thinking is that only companies with great guidance stories to tell–such as Twilio (TWLO)–or companies with guidance so bad that not announcing it might leave them open to an investor lawsuit will announce any guidance revisions. Which means that investors and traders will go into earnings season with way less information than they would prefer in such a volatile market and economy.

Fourth, the sparse supply of pre-earnings announcements will make the market very sensitive to post-earnings guidance for the fourth quarter. That’s likely to be in short supply too in the next few weeks because companies really don’t have any idea of where the economy is headed for the remainder of the year. The lack of guidance, however, will just confirm the doubts and worries that many investors and traders have about the fourth quarter and the direction of the economy.  More worry will lead to more volatility. That’s not exactly something the market is hoping for in the fourth quarter.