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A Big Week Ahead for Financial Sector ETFs

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Financial sector ETF investors will be closely watching the market ahead as the earnings season will kicks off in full force next week, with big Wall Street banks teeing up.

J.P. Morgan Chase & Co (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) will be the first to release fourth-quarter results on Tuesday, January 14.

On Wednesday, January 15, financial stock watchers will be looking for Bank of America (NYSE: BAC), BlackRock (NYSE: BLK), Goldman Sachs (NYSE: GS), Signature Bank (NYSE: SBNY) and U.S. Bancorp (NYSE: USB)

Additionally, the Bank of New York Mellon (NYSE: BK), Charles Schwab (NSYE: SCHW) and Morgan Stanley (NYSE: MS) will be on tap, Thursday, January 16.

ETF investors can also get in on the action through something like the Financial Select Sector SPDR (NYSEArca: XLF), the largest financial services ETF. XLF’s top holdings include JPM 12.4%, BAC 8.2%, WFC 5.8%, C 5.0%, USB 2.3% and GS 2.2%.

The financial sector has witnessed the Federal Reserve reverse its monetary policy over 2019 after officials lowered interest rates three times and weakened net interest margins in the banking industry as a result.

Analysts polled by S&P Global Market Intelligence anticipate fourth-quarter earnings per share for S&P 500 financial companies to increase 10.5% year-over-year, MarketWatch reports. This would mark the second-highest estimate among the 11 sectors after utilities, which are expected to see an 11.8% increase in EPS.

”For the fourth quarter, we forecast net interest margins (NIM) to be down 4 basis points [from the third quarter]for the median Universal Bank,” Keefe, Bruyette & Woods analyst Brian Kleinhanzl wrote in a note.

Looking ahead, Kleinhanzl projects ongoing pressure on margins over 2020, but the trend could accelerate, leading to a flattening of net interest margins in 2021, after a “modest” dip in deposit costs during the fourth quarter.

Among the largest 12 U.S. banks, analysts estimate half had higher earnings per share while five had lower EPS.

For more information on the financial sector, visit our financial category.

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