3 Big Bank Stocks Perking Up on Fed Hopes 

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bank stocks - 3 Big Bank Stocks Perking Up on Fed Hopes 

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U.S. equities are pushing to new record highs on Tuesday, pushed higher by bank stocks, as well as better-than-expected results from Caterpillar Inc. (NYSE:CAT) and McDonald’s Corporation (NYSE:MCD) before the open. As a result, the S&P 500 is testing the 2,480 level for the first time. And more is on deck thanks to one of the most crowded slates of the earnings season.

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Investors also are bracing for the conclusion of a two-day Federal Reserve policy meeting on Wednesday. And it could be a positive for big bank stocks.

While no rate hike is expected (and isn’t predicted until December according to the futures market), policymakers are likely to hint at the start of a “quantitative tightening” program at its meeting in September. This, if done, would represent the beginning of the process to scale back the Fed’s $4.4 trillion balance sheet bloated by years of asset purchase stimulus.

The bond market seems to be bracing for this already, with long-term Treasury bonds selling off hard on Tuesday pushing the iShares Barclays 20+ Yr Treas.Bond (ETF) (NASDAQ:TLT) down to lows seen earlier this month. That’s pushing up the 10-year yield and lifting the yield curve.

Higher long-term interest rates translate directly into higher profitability for banks. No surprise then that the Financial Select Sector SPDR Fund (NYSEARCA:XLF) is up 1.3%, gapping up and over the high set in March. The move looks fresh and could be accelerated by confirmation the Fed’s QT program is coming.

Here are three big bank stocks set to run higher.

Bank Stocks Perking Up: Bank of America (BAC)

Bank Stocks Perking Up: Bank of America (BAC)Bank of America Corp (NYSE:BAC) shares are lifting off of two-month uptrend support and look ready for a run at the March high near $25.50.

Shares have been in an eight-month-long sideways stasis, centered near $23, as the post-election ebullience faded and long-term interest rates suffered a dip. With the Fed likely to commit to pushing up long-term rates aggressively, however, the stock looks ready for a breakout move higher.

When the bank last reported results on July 18, earnings of 46 cents beat estimates by two cents on a 7.1% year-over-year rise in revenues. The company will next report results on Oct. 13. Earnings of 47 cents per share are expected on revenues of $22.2 billion.

I have recommended the August $25 BAC calls to Edge Pro subscribers.

Bank Stocks Perking Up: JPMorgan Chase (JPM)

Bank Stocks Perking Up: JPMorgan Chase (JPM)

When JPMorgan Chase & Co. (NYSE:JPM) last reported on July 14, earnings of $1.82 per share beat estimates by 23 cents on a 4.6% rise in revenues. Shares dipped in response as investors were disappointed by a 26% drop in mortgage banking revenue.

The company will next report results on Oct. 12 before the bell. Analysts are looking for earnings of $1.67 per share on revenues of $25 billion.

At the moment, JPM shares are rising off of their 20-day moving average to close in on the high set in the first week of July. The bulls have been consolidating their break above the early March high near $92 and look ready for a definitive push above $94.

Bank Stocks Perking Up: Citigroup (C)

Bank Stocks Perking Up: Citigroup (C)Citigroup Inc (NYSE:C) scored an earnings beat last month, with profits of $1.28 per share topping the consensus by 7 cents, on a 2% rise in revenue. Results were dragged down slightly by an increase in credit costs related to an increase in loan losses.

The company will next report results on October 12 before the bell. Analysts are looking for earnings of $1.31 per share on revenues of $17.7 billion.

Traders should note that C shares are reversing a month-to-date decline to challenge the highs above $68 a share set earlier this month. This caps a gentle upswing from the December-May consolidation range.

Impressively, shares have more than doubled from their February 2016 low as energy sector default fears have faded.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/3-big-bank-stocks-perking-up-on-fed-hopes/.

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