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“A good first impression can work wonders.” – J.K. Rowling

Futures are attempting a bounce after yesterday’s wallop, and positive reactions to earnings from Bank of America (BAC) and Morgan Stanley are contributing to the positive tone.  The only economic reports for the morning were Housing Starts and Building Permits, and both came in significantly higher than expected and at their second-highest levels since the financial crisis.  The only readings that were strong for each series were in Q1 of 2021.

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First impressions are always important, but they’re not always accurate, and that’s the hope of bulls following the first days of earnings season. Banks kicked off the Q4 earnings season late last week, and two of the largest to report were Goldman Sachs (GS) and JP Morgan Chase (JPM).  The stocks of both banks had abysmal reactions to their reports.

Following Friday’s report from JPM, the stock declined 6.15% which ranks as the worst earnings reaction day performance for the stock in at least 20 years beating out the 6.06% decline the stock experienced in January 2009 during the thick of the financial crisis.  The reaction in GS to its earnings report on Tuesday wasn’t much better with the stock falling just under 7%.  That was large enough to rank as the second-worst earnings day reaction for the stock behind only the 11.56% decline in April 2009 just as markets were coming out of the financial crisis.

As disheartening as a bad first impression can be, one potential bright side is that it can have the effect of resetting the bar low, and in early trading, both Bank of America (BAC) and Morgan Stanley (MS) are trading up close to 3% in reaction to their reports.  Whether those gains can hold through the opening and closing bell, though, is another story.

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