Stocks were dragged down on Tuesday to their worst loss since the post-Brexit wipeout amid ongoing concerns over the decline in crude oil. And while prices are rebounding somewhat on Wednesday’s inventory data, the recent trend has been downward on renewed oversupply concerns.
Prices closed below the $40-a-barrel benchmark for the first time since April, a 24% decline from the early June high.
While energy stocks have been taking the hits on the price weakness, financial stocks look vulnerable as well on the likely reappearance of energy sector default worries — something that slammed bank stocks and the broad market lower at the start of the year.
A recent Bloomberg article highlighted how quickly many high-cost U.S. shale producers are burning through cash, putting their solvency at risk.
As a result, keep an eye on these seven bank stocks. All look vulnerable to a souring of investor sentiment and many have barely recovered from the oil-driven lows hit earlier this year.
Bank Stocks at Risk: Citigroup Inc (C)
Citigroup Inc (NYSE:C) shares have been languishing below their 200-day moving average since December and are barely clinging to support near their 50-day moving average over the past two months.
Investors weren’t impressed by better-than-expected earnings on July 15 as revenues fell 9.9% from last year. Net income fell 16.7% from last year.
The company will next report results on Oct. 14 before the bell. Analysts are looking for earnings of $1.17 per share on revenues of $17.3 billion. Edge Pro subscribers have initiated a position in the Aug $43 C puts.
Bank Stocks at Risk: Bank of America Corp (BAC)
Bank of America Corp (NYSE:BAC) has also been stuck below its 200-day moving average since December, with three separate breakout attempts foiled since April.
The company reported in-line revenues and an earnings beat back on July 18. But investors focused on the 7.2% year-over-year drop in earnings and a $1.3 billion decline in interest income. Goldman Sachs recently highlighted the company’s $21 billion energy loan exposure.
The company will next report results on Oct. 12 before the bell. Analysts are looking for earnings of 33 cents per share on revenues of $21 billion.
Bank Stocks at Risk: Wells Fargo & Co (WFC)
Wells Fargo & Co (NYSE:WFC) is among the most technically weak on this list, with shares trading below both its 200-day and 50-day moving averages.
The company reported inline results on July 15, with revenues increasing 4% from last year. Analysts at RBC lowered their price target on increased headwinds especially lower long-term interest rates.
The company will next report results on Oct. 14 before the bell. Analysts are looking for earnings of $1.02 per share on revenues of $22.1 billion.
Bank Stocks at Risk: KeyCorp (KEY)
KeyCorp (NYSE:KEY) has been trading in a tight range below both its 200-day and 50-day moving averages since the beginning of July. The company reported weaker-than-expected earnings on a year-over-year drop in revenue. Net interest margin fell to 2.76% from 2.88% last year.
The company will next report results on Oct. 20 before the bell. Analysts are looking for earnings of 27 cents per share on revenues of $1.3 billion.
Bank Stocks at Risk: Goldman Sachs Group Inc (GS)
Goldman Sachs Group Inc (NYSE:GS) shares have been trading below their 200-day moving average since November and failed to overtake this long-term trendline during an attempt back in July.
Investors didn’t respond to a top- and bottom-line beat when it reported quarterly results back on July 19, as the focus was on an 11% decline in investment banking revenues and a 38% drop in investing and lending revenue.
The company next reports results on Oct. 18 before the bell. Analysts are looking for earnings of $3.74 per share on revenues of $7.3 billion.
Bank Stocks at Risk: Fifth Third Bancorp (FITB)
Fifth Third Bancorp (NASDAQ:FITB) shares have returned to overhead resistance near $19 that has constrained the stock since April.
The company reported better-than-expected earnings of 41 cents per share on July 28 (beating estimates by three cents). The company was downgraded by Morgan Stanley earlier in July.
The company reports next on Oct. 20 before the bell. Analysts are looking for earnings of 46 cents per share on revenues of $1.55 billion.
Bank Stocks at Risk: JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co. (NYSE:JPM) shares, while trading above their 50-day and 200-day averages, are bonking on resistance from a five-month trading range near $65.
The company reported a top- and bottom-line beat on July 14, but investors focused on an increase in credit loss reserves (up to $1.4 billion from $935 million). The company is holding an energy loan book of around $14 billion according to Goldman Sachs.
The company’s next report falls on Oct. 14 before the bell. Analysts are looking for earnings of $1.37 per share on revenues of $23.4 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
