Trader Scott
At our website, we like to re-post articles which give the consensus view of markets. We run these articles for a reason, as it’s extremely helpful to always stay aware of the consensus view. Certainly, the crowd can be right for a long time, but at the same time, it’s also completely certain they will all be wrong together – right at the highs. We don’t re-post a lot of articles, but I highly recommend that you read the ones we do. They can either be outside-the-box helpful, or total-consensus helpful.
For the last several months, I have been adamant about my bearishness on financials. One of the main reasons was my bullishness on bond prices, leading to a flattening yield curve, and trouble for the banks. Our great subscribers have heard my bearish/contrarian comments several times. And on the very high day in the Dow Jones Industrials, we ran the following articles – as a “public service”.
U.S. stock index futures were higher on Wednesday as investors assessed President Donald Trump’s speech, while bank stocks rose on increased possibility of an interest rate hike this month.
In his first address to a joint session of Congress late Tuesday, Trump said he wanted to boost the U.S. economy with a “massive tax relief”, overhaul the Affordable Care Act and make a $1 trillion effort on infrastructure.
His comments, though lacking in detail, underscored his pro-growth stance that has helped Wall Street hit record highs in a post-election rally.
However, the markets focused on comments from a handful of Federal Reserve officials, including the influential New York Fed President William Dudley, who said the case for tightening monetary policy had become “a lot more compelling”.
The probability of a March rate hike jumped to 67 percent from roughly 30 percent after the comments, according to Thomson Reuters data. The Fed’s policy-setting body meets on March 14-15.
The dollar jumped 0.58 percent to mark its biggest one-day gain since Jan. 18, while shares of Bank of America (BAC.N), Goldman Sachs (GS.N) and Citigroup (C.N) rose about 1.2 percent in premarket trading.
Yellen, who has said a rate increase could happen in an upcoming meeting, is scheduled to speak on economic outlook on Friday. Meanwhile, investors will closely watch Fed Board Governor Lael Brainard comments on Wednesday for her take on rates.
A report on consumer spending and inflation numbers from the Commerce Department is due at 8:30 a.m. ET (1330 GMT) and could bolster the odds of a rate increase this month.
The Dow Jones Industrial Average .DJI broke its 12-day record streak on Tuesday as retail stocks declined and investors remained cautious ahead of Trump’s late evening speech.
Among stocks, Lowe’s (LOW.N) jumped 5.7 percent to $78.58 after the home improvement chain issued an upbeat sales forecast for the year.
Cybersecurity firm Palo Alto (PANW.N) tumbled 21 percent to $120 as its current-quarter revenue and profit forecast missed analysts’ estimates.
Futures snapshot at 6:57 a.m. ET:
Dow e-minis 1YMc1 were up 82 points, or 0.39 percent, with 44,717 contracts changing hands.
S&P 500 e-minis ESc1 were up 10.75 points, or 0.45 percent, with 212,201 contracts traded.
Nasdaq 100 e-minis NQc1 were up 26.75 points, or 0.5 percent, on volume of 41,700 contracts.
MATTHEW GALGANI 2/28/2017
Big banks like Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) have soared since Donald Trump’s election, but IBD 50-member Home BancShares (HOMB) outranks them all in Forbes’ latest list of the ‘Best Banks In America.’
The Arkansas-based parent of Centennial Bank ranked No. 8 on this year’s list, which looked at 10 metrics to measure growth, credit quality and profitability.
At No. 57, JPMorgan ranked highest among the country’s four largest banks, followed by Wells Fargo (No. 63), Citigroup (C) (No. 72) and Bank of America (No. 97).
Other IBD 50 members that made the Forbes’ screen include Western Alliance Bancorp (WAL), Bank Of The Ozarks (OZRK) and Sterling Bancorp (STL), coming in at No. 4, No. 11 and No. 36, respectively.
Birds Of A Financial Feather
Financial sector stocks in general have been doing well since the November election, and Home BancShares’ Banks-Southeast industry group currently ranks a strong No. 15 among the 197 groups IBD tracks.
In fact, five of the top 10 industry groups and eight of the top 20 are bank or finance related.
But stocks that flock together may also head south for a Wall Street winter when institutional investors eventually shift their attention to other sectors.
Home BancShares has posted earnings growth ranging from 21% to 25% over the last five quarters, but revenue gains have been slowing, slipping from 27% to 9% across the last four reports.
While the number of funds with a position in the bank stock dipped last quarter, an A Accumulation/Distribution Rating and 1.3 Up/Down Volume Ratio still point to institutional demand.
Ready To Vault Higher?
After moving up sharply in November and early December, Home BancShares has been consolidating those gains in a second-stage flat base with a 28.71 entry.
The stock recaptured its 50-day line earlier this month and its 10-day moving average moved back above that longer-term benchmark in a sign of renewed technical strength.
On Monday, Home BanchShares rose just under 2% in rising and above-average volume, closing the day just pennies below the buy point.
The stock pulled back Tuesday, as the Nasdaq and S&P 500 also slipped lower. But volume was well below average and Home BancShares managed to hold support at its 10-day moving average.
Look for the stock to rebound and break out decisively in heavy volume, and see if its Relative Strength line heads into new high ground.
Leave a Reply