JPow’s Back At It Again

Q3 was a beefy quarter for earnings. 💪 Earnings grew 42.6% YoY and revenue grew 17.0% YoY among S&P companies, with the energy sector taking the lead. Almost every sector did better than expected, helping the index best analyst estimates overall. Though Q3 is a distant memory, we need to put our earnings cap on for the real all-star of 2021: Q4 earnings!! There’s no better time for them to come, especially with all the FUD in the equities market. 🥳

This week marks the formal start to Q4 earnings (yes, 20 companies in the S&P 500 have already reported.) Many of those names will be big bank stocks, reporting on Friday. Financials is expected to greatly benefit from rising interest rates and new macro policy. Banks have been retreating from old-fashioned sources of income, like high fees, because of competition with fintech and neobanks. However, banks will likely benefit in the form of higher interest income. 💰

Ultimately, banks will be a huge indicator of what’s to come. The narrative for Q4 earnings will be companies facing threats of slowed earnings and revenue growth; the pandemic pressed “reset” on business operations, which made for fantastic YoY earnings and revenue growth. In 2022, those exciting double-digit growth figures might start to look a lot less appetizing to investors. 🤢 Refinitiv estimates earnings growth of 22.4% YoY and revenue growth of 12.1% for the quarter. Both figures could increase, as they did in Q3, thanks to energy names.

Overall, Q4 will be an indicator for FY 2022. So far, Refinitiv is forecasting a 7.6% growth rate in the first quarter of 2022. However, much of that growth is coming from energy companies, and a lot of that growth may already be priced in.

You can keep track of Q4 earnings as they happen on Refinitiv Lipper’s “This Week in Earnings,”updated every Friday. We’ll touch on earnings throughout the quarter. Keep your eyes peeled. 🕵️‍♀️

At his confirmation hearing in front of Congress today, Fed Chair Jerome Powell eased concerns and assured the public that the U.S. is ready for tighter monetary policy. 💡

To tackle high inflation, Powell restated the Fed’s plan to conduct interest rate hikes and taper monthly bond purchases — the market reacted well to the news, recovering some of yesterday’s losses. Powell’s hearing suggested that it is likely he will be appointed for a second term in his current position.

Previously, investors worried that the Fed’s aggressive tightening of monetary policy would result in a ‘triple threat’ that could damage the economy while reducing inflation. Specifically, investors were concerned that the Fed would reduce bond buying, taper asset purchasing, and increase interest rates all at once, which could have unintended consequences in the broader economy. Today, however, Powell emphasized his commitment to reducing inflation while balancing the greater economy, which somewhat appeased investors.

Powell stated “As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year. At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”

Powell also revealed the Fed’s new ethics code in an effort to battle conflicts of interest among governing officials. You can watch a livestream of today’s hearing here. 🦅 🇺🇸

Back in June 2021,Robinhood was ordered to pay a $57 million fine by financial regulator FINRA for “outages and misleading customers” during market volatility in March 2020. An additional $13 million in restitution was included as part of the penalty, bringing the total fine to over $70 million. It was, and still is, the largest FINRA penalty imposed. 

It also wasn’t the first fine against the controversial new-age broker-dealer, and obviously wouldn’t be the last. FINRA looks prepared to make Robinhood pay up for its role in the January 2020 stock market volatility, during which the broker-dealer froze trading in retail-popular stocks like GameStop, AMC Entertainment, American Airlines, and Koss. The regulator has ordered Robinhood to pay $29,460.77 to a 27-year-old truck driver from Connecticut who suffered “significant investment losses“ due to Robinhood’s decision to limit trading. 🤭 At face value, $29,000 isn’t much to a $14 billion company. However, it’s a first-of-its-kind judgment related to the January market volatility. When you start to consider how many tens of thousands of other cases might be filed with the regulator, $29,000 might be the least of Robinhood’s problems. 😬

At least, that’s what MarketWatch opinions writer Thornton McEnery claims in a new piece. McEnery suggests that this fine might open the floodgates for a flurry of other big settlements. ❄️ While there are several class action suits filed against Robinhood and other companies speculated to be involved in the “stock freeze,” FINRA settlements could bring quicker resolutions for retail investors wronged by the broker giant. Based on the sheer size of the January volatility episode, there could be a lot more high-dollar FINRA settlements incoming.

$HOOD is down 53.3% from IPO, trading at $16.41/share. At just $14 billion, Robinhood even feels like a potential acquisition target for a larger finserv company such as Charles Schwab, Vanguard, or Ameriprise… but that’s just speculation. 🤷 Take it for what it’s worth.