The Shorts Have A Big Problem

No surprises: GE and Citi report earnings. Shorts have a big problem: bank stocks were supposed to sell off this earnings week, but stronger than expected results is keeping bank stocks moving sideways and the rest of the market up modestly.

This is sucking in shorts. According to Reuters, State Street, which tracks buying and selling within the $12 trillion in assets it holds as custodian, said flows into U.S. equities were close to the highest they have been in 12 years

1) Our parent General Electricreported first quarter earnings of $0.26, five cents ahead of expectations. GE Capital did report a profit and is expected to be profitable for the year, loss provisions were lower than expected. Weakness in NBC Universal and Healthcare offset gains in Aviation and Energy.

Early consensus is that this is a mostly in-line quarter.

2) Citigroup up 5 percent, as they reported a narrower loss($0.18) than expected ($0.30). Revenues at $24.8 b was also higher than expected.

Like JP Morgan, high trading gains allowed them to absorb higher credit costs. Delinquency trends are up across all consumer categories.

As for the upcoming exchange of preferred shares for common, they say they are continuing to finalize documentation with the government but will not be launched until the conclusion of the stress test. How the government treats Citi is the main short-term cloud over the company.

3) Perhaps the big surpriseis regional bank BB&Tup 7 percent pre-open as they too beat earnings, at $0.51 vs. $0.32 expected. Revenues of $2.18 billion also stronger than the $1.91 billion expected.

This wasn't supposed to happen: regional banks were supposed to have bigger problems, but yesterday Regions Financial and now BB&T are deying those expectations.




Questions? Comments?