Most equities are pushing higher again on Thursday thanks to yet another round of aggressive stimulus from the Federal Reserve. In addition to a $2.3 trillion stimulus to support small businesses and local governments through loans, as well as buy junk bonds in the open market via ETFs such as the iShares High Yield (NYSE:HYG). That said, bank stocks are flying higher.
This addition comes just weeks after the Fed announced it was going to buy investment-grade corporate bonds in the open market. The only thing it is not buying yet is corporate equities. But that seems inevitable now, following in the footsteps of the Bank of Japan.
Moreover, Wall Street bank stocks are surging in a big way in response because not only are they going to be the ones processing Fed/Treasury small business loans, but they are set to benefit from the Fed’s support of the weakest areas of the debt market as well. Ones on the move include:
- Bank of America (NYSE:BAC)
- Wells Fargo (NYSE:WFC)
- JPMorgan Chase (NYSE:JPM)
- Citigroup (NYSE:C)
- Goldman Sachs (NYSE:GS)
The entire sector — as represented by the Financial Select SPDR (NYSEARCA:XLF) — is on the move in a big way, breaking out of an inverse hand-and-shoulders reversal pattern. A test of the highs set in early March looks increasingly likely. That said, let’s look at each of the five bank stocks as the first-quarter earnings season prepares to kick off.
Bank Stocks to Buy: Bank of America (BAC)
Bank of America shares are breaking up and over their upper Bollinger Band, a sign of clear upside momentum that should at the very least result in a test of the 50-day moving average. This breaks above the two-month trading range that’s mired the stock amid the worst of the novel coronavirus fears.
Overall, the company is at the center of the government’s efforts to support small businesses with loans. In fact, Bank of America reported it received 60,000 applications totaling $6 billion back on April 3.
Quarterly earnings are coming up, with earnings to be reported on April 15 before the open. Analysts are looking for earnings of 58 cents per share on revenues of $22.75 billion. When the company last reported on Jan. 15, earnings of 74 cents per share beat estimates by six cents on a 1.8% decline in revenues year-over-year. Additionally, shares were recently upgraded to buy by analysts at DA Davidson.
Wells Fargo (WFC)
Wells Fargo had been under some pressure for a weak balance sheet and questionable sales practices. However, it is enjoying a reprieve: The Fed announced it would temporarily relax growth restrictions on the company so it can provide lending support to small businesses. That is helping shares blast higher, up and out of a two-month consolidation range, setting up a possible return to the 200-day moving average that would be worth a gain of more than 30% from here.
The company will next report results on April 14 before the bell. Analysts are looking for earnings of 59 cents per share on revenues of $19.37 billion. When the company last reported on Jan. 14, earnings of 60 cents per share missed estimates by 52 cents on a 5.34% decline in revenues YOY.
JPMorgan Chase (JPM)
Shares of JPMorgan Chase are surging higher on Thursday, up more than 8%. This is thanks to an expansion of the Fed’s stimulus efforts, pushing back up and over the $100 level.
The company was under some added pressure earlier in the year after CEO Jamie Dimon underwent emergency heart surgery. He seems to be back on his feet, telling CNBC recently that the bank’s dividend would only be suspended under “extremely adverse” conditions.
The company will next report results on April 14 before the bell. Analysts are looking for earnings of $2.22 per share on revenues of $29.66 billion. When the company last reported on Jan. 14, earnings of $2.57 beat estimates by 22 cents on an 8.43% rise in revenues YOY.
Citigroup shares, like the others mentioned here, are also on the move pushing up and out of two-month consolidation range to break a downtrend pattern going back to February. In a recent interview, CEO Michael Corbat said the company would continue to issue its dividend, but had suspended its buyback program and increased paid time off and other benefits in response to the coronavirus outbreak.
The company will next report results on April 15 before the bell. Analysts are looking for earnings of $1.56 per share on revenues of $19 billion. When the company last reported on Jan. 14, earnings of $2.15 per share beat estimates by 31 cents on a 7.36% rise in revenues YOY.
Goldman Sachs (GS)
Shares of Goldman Sachs are also breaking up and out of their upper Bollinger Band, heading towards their 50-day moving average. Stabilization of funding and debt markets will benefit the bank, which should see support flow through to its fixed income, currencies, and commodities business as oil prices stabilize on reports of a possible pre-agreement between Russia and Saudi Arabia.
The company will next report results on April 15 before the bell. Analysts are looking for earnings of $3.48 per share on revenues of $8.36 billion. When the company last reported on Jan. 15, earnings of $4.69 missed estimates by 78 cents on a 23.27% rise in revenues.
As of this writing, William Roth did not hold a position in any of the aforementioned securities.