Bank of America Corp (BAC), JPMorgan Chase & Co. (JPM): Dow (.DJI) Proves Japan Can’t Hold the Market Down

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Though the market began the day in a slump over global economic concerns, the Dow Jones Industrial Average (INDEXDJX:.DJI) is back in positive territory just after 11 a.m. EDT. Some positive economic news here at home is driving the modest gains, while new pushes in Congress are bolstering some of the Dow Jones Industrial Average (INDEXDJX:.DJI)’s components.

Dow Jones Industrial Average (INDEXDJX:.DJI)

Pacific time
With continued unease over the effect of central banks’ efforts, investors may have translated signals from Japan as truth for the U.S. markets. The Japanese Nikkei lost another 6%-plus yesterday in trading, which equates to a 1,000-point loss for the Dow Jones Industrial Average (INDEXDJX:.DJI). This happened despite Herculean efforts from the Bank of Japan to stabilize the Japanese economy in the past months. Demonstrating the ineffectiveness of some monetary policy, U.S. investors sent the market tumbling this morning in fear of the same developments occurring here. The Federal Open Markets Committee meets next Tuesday, and will give investors the news they’ve been waiting for on the Fed’s intentions for its current stimulus plan.

Back in the U.S., increases in retail sales and a decline in new jobless claims boosted the market back above breakeven. May retail sales rose 0.6%, beating analyst estimates of 0.4%, due to strong gains in the automotive and home-building supplies market. Since retail sales account for 30% of consumer spending, this is a great signal to investors that households are back on solid footing with their financials and the cuts from Washington along with higher taxes aren’t going to prolong the softening market conditions we’ve seen in the past few weeks. Since cars are a high-ticket purchase, this also signals a willingness of consumers to borrow, showing the ability to manage more personal debt.

Jobless claims fell by 12,000 last week, a positive change from the previous week’s sharp increase. The decline in new claims shows that companies have cut back on employees enough, and has demonstrated a smaller impact of the sequestration than initially anticipated. Both pieces of economic news, having beat expectations, give investors increased confidence that the second quarter’s prospects are still improving from the softening seen in the past few weeks.

You can bank on it
Despite the weakness in Japan that has previously caused headaches for some of the nation’s biggest banks, JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC) are both firmly in positive territory this morning. Likely as a result of a new bill in the House of Representatives, the banks are enjoying some increased confidence that portions of the government are trying to make sure regulators don’t cut off opportunities for the banks to profit.

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