Banks With A Bang
The banks are back! For anyone that may have missed it, bank stocks went on a tear today (July 15th, 2022) with JPM, MS, and GS up about 4.5% each during Friday’s trading session. A shocker to most after the bank stocks were down 15% from their last earnings call at the start of the month.
JPM reported its earnings on Thursday and saw its shares sell off a bit after missing expectations. The company also stated that it would suspend its share repurchase program to build capital for 2023 and 2024. MS shared the same fate as their revenue came in below expectations. So why the rally? Citigroup reported earnings and surprisingly came out swinging. Citigroup demolished earnings with 1.68 EPS and a 2.19 actual report (Jesus). This ultimately sent the stock flying a whopping 13% after being the worst performing bank stock over the past two years. Another booster for the banks was a statement from Waller & Bullard, informing us that a 75-basis-point hike was scheduled for the next meeting which is 25 less than anticipated after a 9% inflation reading earlier this week.
The rise of inflation has continued to instill fear in the hearts of many investors as the Federal Reserve will need to continue to raise interest rates which will assist the banking sector as cash, hopefully, and other loans gain on interest. Not the most exciting returns but it offer solidarity. The stance JPM is taking on preserving capital is a smart move, one that paid off for Buffet when his spending spree began earlier this year. The overall market reacted fairly well and will likely see positive flows until the next meeting. Now that OPEX has passed, the volatility has been eviscerated to a certain extent which should alleviate markets. For anyone that missed it, I wrote about the potential short-term rally heading into earnings season with tech earnings being the main course. I had my doubts by mid-week following the inflation report but after today’s action, surprises, and volatility destruction (-8.9%), it is looking up to be a decent July. Thanks for reading, happy Friday, and have a safe one. More to come.