×

Forget earnings—here’s what matters for bank stocks

Third-quarter earnings for the banks are trickling in, and the results so far have been weighing on the stocks.

The S&P 500 bank industry group fell more than 2 percent Tuesday, after JPMorgan reported earnings that missed analyst expectations. And according to one technician, there's more trouble ahead for the financials sector, but not because of earnings.

Read More JPMorgan slashes Q3 growth estimates

Todd Gordon of TradingAnalysis.com said as the 10-year Treasury yield falls lower, financial stocks will likely follow.


"Interest rates, in my opinion, are acting as a leading indicator," Gordon said Wednesday on CNBC's "Power Lunch." "Financials are starting to heed the warning that bond yields are giving us. I think financials trade lower."

Gordon said Goldman Sachs, which is scheduled to report earnings Thursday, could break below a key support level of $171, which may be a troubling sign for other bank stocks.

Read More Bank of America earnings, revenues beat expectations

However, Andrew Burkly of Oppenheimer said he sees banks approaching a bottom.

"We've kind of gone through this ebb and flow with the banks and the financials over the past couple years where when rates start to creep down and expectations start to fall, the banks start to underperform," Burkly said. "There may be a little bit more pressure but we think we're probably a little bit closer to a floor."

While banks will face more challenges from low interest rates and trading revenue, Burkly said he expects third-quarter earnings will be adequate.

"Analysts have been taking their numbers down pretty aggressively over the past couple months as rate expectations have been pushed out," he said Wednesday. "I expect some pretty decent results from the overall group"

Bank of America and Wells Fargo posted third-quarter earnings this week that beat expectations. Citigroup is also scheduled to report results before the bell Thursday.

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number, and a question to TradingNation@cnbc.com

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect