In this series, we’ll explore the data announcements and events that may impact the performance of bank stocks during the upcoming week.
With the Dow Jones Industrial Average setting a 10-day record with its continued gains, the markets have been on point as investors flood the Street. But this past week has been full of anticipation and suspense as bank investors waited on the second round of stress test results from the Federal Reserve. With the results released last night, and all but two banks getting the green light, shareholders can now turn their attention to the next round of data points that will be sure to influence the movement of their portfolios.
Let’s take a look at what’s going to be announced, what banks may be affected the most, and what you should look out for in the coming days.
Housing Market Index — produced monthly, this index surveys several different aspects of the housing market in order to determine its strength and growth. Bank investors should be interested in this index for the data it can provide on current and pending home sales, the six-month outlook for home sales, and the flow of new potential buyers into the market. Since loans (particularly mortgages) have been the driving factor for bank growth over the past year, housing market data is a huge driver for the performance of bank stocks.
FOMC meeting — held approximately every six weeks, the outcome of the FOMC meetings can be a huge driver for stock performance. Bank investors should have a particular interest in the FOMC’s policy changes since it will determine the interest rates banks can charge. Though Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) were the largest producers of mortgages during the second half of 2012, the net interest margin spreads were minuscule because of the near-zero interest rate environment. Both were able to offset the squeeze with non-interest income, like mortgage origination fees, however.
Housing starts — a view of the new construction for the residential housing market, the housing starts data provides a great view into the sentiment toward the market’s rebound. Combined with the interest rate data from the FOMC meeting, bank investors should get a good sense as to how the market will be progressing, as well as how much new business may be walking into the banks in the form of new mortgages.
FOM.ECON.MEX.SAB D.CV UTS (FRA:FOMC) meeting announcements, forecasts, and chairman press conference — the results of the FOMC meeting will be disclosed and are sure to have an immediate effect on the markets. The last time FOMC meeting minutes were released, the markets took a dive when it was revealed that some of the committee members were in favor of ending the latest round of quantitative easing early. Bank of America Corp (NYSE:BAC) took the biggest hit from this news, as it is one of the most volatile stocks in the financial sector. The announcements and forecasts will provide insight into how the Fed will proceed with its monetary policy and interest rate policy.
MBA purchase applications— a weekly look at the mortgage application activity from the Mortgage Banker’s Association. A decline in mortgage applications can be a sign that the banks are not getting new business from the housing sector, but look for a correlation between this data point and the other housing-related data during the week.