(Bloomberg) -- Another quarter of big reserve releases at top banks may once again be skewing sentiment about the broader market.

In general, when reported earnings beat consensus estimates, the S&P 500 Index tends to do well. Bank earnings-per-share beats this quarter are topping misses, while the group accounts for a disproportionately large amount of the index’s earnings-per-share. Financials make up 11% of the S&P by weight, but ~20% of the index’s EPS, according to Wells Fargo strategist Chris Harvey, who sees bank earnings pushing the index EPS for the year above $200. 

That could be good news for stocks across the board. However, those bank beats may also be reflecting large amounts that had previously been set aside for souring loans. 

Take JPMorgan Chase & Co, for example. The bank reported a third-quarter recovery of credit losses of $1.53 billion, versus an estimated provision of $17.9 million. Bank of America Corp.’s recovery of credit losses was $624 million, compared with an estimate of $175.2 million. And Wells Fargo & Co. said it released $1.7 billion from its credit loss reserve, resulting in a 30-cent EPS gain.

A 1.5% gain in third-quarter EPS since the start of October was driven entirely by financials, BofA equity and quant strategist Savita Subramanian wrote in an earlier note. She add a bit of caution, saying that during the last quarter, after the first week, earnings had beaten by 3.5%. She sees third-quarter EPS ultimately matching consensus estimates. 

This was a post on Bloomberg’s Markets Live blog. The observations are those of the blogger and not intended as investment advice. For more markets analysis, go to MLIV.

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