Despite the unemployment rate falling to 4.7%, all three indexes are in the red this morning after the Labor Department reported that nonfarm payrolls increased 38,000 versus the 160,000 that many analysts were expecting. The Dow Jones index is down more than 100 points, the S&P is down 0.7% and the NASDAQ index is off almost 1%. Among the stocks that are lower than the index are E*TRADE Financial Corp (NASDAQ:ETFC), Bank of America Corp (NYSE:BAC), Immunomedics, Inc. (NASDAQ:IMMU), Gogo Inc (NASDAQ:GOGO), and Globalstar, Inc. (NYSEMKT:GSAT). Let’s find out why traders are selling and see what the smart money thinks of each stock.
At Insider Monkey, we track around 760 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
Friday’s Weak Nonfarm Payroll Wrecks Havoc in the Financial Sector
E*TRADE Financial Corp (NASDAQ:ETFC) and Bank of America Corp (NYSE:BAC) are down by 5% and 3.4% respectively due to the weak non-farm payroll report. Because the payroll number came in significantly below expectations, investors now don’t know if the Federal Reserve will raise interest rates this month during its FOMC meeting. If the Federal Reserve remains accommodative and interest rates remain low, E*TRADE Financial Corp (NASDAQ:ETFC) and Bank of America Corp (NYSE:BAC) won’t make as much in interest related income and their earnings per share won’t be as strong as many bulls expected. In the intermediate to long term, however, many investors believe the Federal Reserve will eventually raise rates and both stocks will benefit from wider net interest margins. Of the 766 elite funds in Insider Monkey’s database, 39 were long E*TRADE and 110 were bullish on Bank of America at the end of March.
On the next page, we examine Immunomedics, Gogo, and Globalstar.