Banks in spotlight as earnings get rolling

By Caroline Valetkevitch - Analysis

NEW YORK (Reuters) - Banks will hog the spotlight in the first big week for this quarter's earnings period as investors attempt to discern whether the surprising improvement in earnings in the first quarter continued through the second quarter of the year.

Analysts are not forecasting a replay of the first quarter, when stronger-than-expected results from financial companies sparked a rally in the sector and by extension, the rest of the market, that reached its apex in early June before fizzling out.

Earnings for the financial sector, as well as the rest of the S&P, are expected to have declined in the most recent quarter, and investors question whether companies will show enough improvements to warrant further gains in stocks.

Estimates for the S&P 500 as a whole show a decline of 36 percent in second-quarter earnings compared with a year ago, according to Thomson Reuters data. Analysts are looking forward to results to see if companies are feeling more optimistic about their businesses for the second half of the year.

Among the blue-chip financial names reporting this week are Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase, along with tech mainstays Google,International Business Machines and Intel, as well as General Electric.

"Given where we were last quarter, I would be surprised if we see as much positive news" from banks, said Owen Fitzpatrick, head of the U.S. Equity Group at Deutsche Bank Private Wealth Management, in New York.

"(But) I don't think there are a lot of concerns around financial earnings in general," he said. "We're beyond the write-offs now to a large extent, and that eventually will be more of a positive for financials."

Second-quarter earnings for financial companies are projected to have fallen 55 percent from a year ago, compared with a decline of 63 percent in the first quarter, according to Thomson Reuters' data.