Bank Earnings Are Roaring, But Wall Street Isn't Ready to Celebrate

Key Points

• Bank earnings from Goldman Sachs, JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup all topped estimates, but analyst Marc Chaikin says shrinking loan-loss reserves, not just stronger business, are propping up the bottom line
• Chaikin flags mega-cap tech, including Oracle, Tesla, and NVIDIA, as vulnerable to a sell-the-news pattern this earnings season, while beaten-down chip names like Micron, AMD, and SanDisk look buyable to him
• Small and mid-cap names such as Avnet could see more earnings follow-through than mega-cap peers, Chaikin says, while he expects a rough six-month stretch for SpaceX shares

Earnings season is here, and the setup is unusual: expectations were already high before a single major report landed.

That matters because high expectations raise the bar for what counts as "good enough"—a company can beat last year's numbers and still disappoint the market if it doesn't beat this year's inflated bar.

Analysts raised their estimates heading into this season, a pattern that has historically preceded more volatility, not less, even when the underlying economy is strong.

Get Avnet SMS alerts:

Sign Up

Marc Chaikin of Chaikin Analytics says this earnings season is likely to reward patience and selectivity over blanket optimism, and the early bank numbers show exactly why. That tension is already visible in the first results of the season: the banks.

Bank Earnings Beat, But the Real Driver Is Under the Hood

Big bank earnings landed strong across the board.

Goldman Sachs NYSE: GS, JPMorgan Chase NYSE: JPM, Bank of America NYSE: BAC, Wells Fargo NYSE: WFC and Citigroup NYSE: C all topped estimates—and the Financial Select Sector SPDR Fund NYSEARCA: XLF hit a new high on the news.

But the headline beat isn't the full picture investors should weigh. A meaningful chunk of this quarter's bank profits came from shrinking loan-loss reserves rather than pure business growth, per Chaikin's analysis.

Banks set aside less money to cushion against potential defaults when the economy looks stable, and that reversal flows straight to the bottom line.

It's a real tailwind, but a one-time one, not a repeatable growth engine. For investors, that argues for treating bank stocks as a buy-the-dip opportunity rather than something to chase at current highs.

Big Tech Splits Into Winners and the Rest

Not every mega-cap name deserves the same treatment this earnings season, and lumping them together would be a mistake.

Among the six mega-cap technology companies highlighted by Chaikin—Microsoft NASDAQ: MSFT, Apple NASDAQ: AAPL, Amazon NASDAQ: AMZN, Alphabet NASDAQ: GOOGL, Oracle NYSE: ORCL, and Meta Platforms NASDAQ: META—only Apple and Meta currently carry a bullish Power Gauge ratings, meaning the others haven't cleared his fundamental and technical bar despite their size.

Investors weighing whether their own mega-cap holdings pass that same bar can run any stock through the Power Gauge directly.

Oracle is the clearest case for caution.

The company has committed roughly $300 billion to build data-center capacity for OpenAI, a bet that looks shakier now that OpenAI has pushed its IPO timeline from 2026 into 2027 while holding out for a $1 trillion valuation. That's a meaningful read-through: Oracle's growth story is tied to a customer whose own path to public markets just got murkier.

Tesla NASDAQ: TSLA carries a similar caution flag, and NVIDIA NASDAQ: NVDA faces its own pattern worth watching: the stock has sold off after each of its last four earnings reports despite beating estimates every time.

For investors holding these names into earnings, that history provides a reason to expect volatility around the report itself, regardless of how the numbers come in.

The Chip Trade Looks Like the Opposite Setup

If mega-cap tech is a "good news might not be good enough" story, chip stocks one rung down are closer to "the bad news may already be priced in."

Micron Technology NASDAQ: MU, AMD NASDAQ: AMD, SanDisk NASDAQ: SNDK, Dell Technologies NYSE: DELL, and Hewlett Packard Enterprise NYSE: HPE have all pulled back 15% to 20% from recent highs, even after several have posted strong earnings results.

That combination—still-bullish fundamentals paired with an oversold chart—is what Chaikin points to as the more attractive setup heading into this earnings cycle. The distinction is that this isn't a bet on the next earnings report specifically, but a bet that a group already down double digits has more room to recover than room to fall further.

What Investors Should Watch With SpaceX

SpaceX NASDAQ: SPCX shares have continued sliding since the IPO, and the reason matters for anyone deciding whether to buy the dip.

The company's own prospectus reframed SpaceX as an AI business rather than purely a Starlink and launch operation, a repositioning that the market hasn't rewarded.

On top of that, standard post-IPO insider lockup periods typically run around six months, a stretch that historically has kept pressure on newly public stocks (Facebook's 2012 debut is a comparable case).

The practical takeaway: this isn't necessarily a broken company, but it may be a slow-moving stock for a while yet, and investors expecting a quick turnaround may be early.

The same caution extends to smaller space-adjacent stocks that rallied ahead of the IPO and have since given much of that back, since many still lack the earnings to justify a rebound on their own.

The Real Opportunity May Be Where Fewer People Are Looking

Here's the more counterintuitive takeaway: a great earnings report doesn't always help a stock the way investors assume.

In mega-cap names like NVIDIA, the good news is often already priced in, and index funds may be the only reliable buyers left, regardless of results.

Small and mid-cap stocks work differently. Because they're covered by fewer analysts, a strong quarter tends to attract new coverage and new buyers rather than getting absorbed immediately.

Chaikin points to Avnet NASDAQ: AVT as an example.

After posting strong results in April, the electronic components distributor climbed from roughly $77 to $94 over the following two months, the kind of sustained follow-through he says is more typical in the mid-cap space than at the mega-cap end.

A recent breakout in value-oriented S&P 500 stocks adds a broader tailwind to that thesis.

For investors willing to look past the most obvious names, this segment of the market may offer better risk-reward this earnings season than the names getting the most headlines.

This Earnings Season Rewards Patience, Not Panic

The risk this earnings season is real: high expectations, a market already near record highs, and a track record of sell-the-news reactions in the most-watched names. The upside is just as real, though.

A pullback in strong companies caught up in a broader "sell the news" reaction can become an entry point rather than a warning sign, particularly in beaten-down chip names and under-covered mid-caps trading well below their recent highs.