Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

One Reason Wells Fargo & Co (WFC) Is Trading Down Today

Two hours into the trading day, Wells Fargo & Co (NYSE:WFC) stock is down 0.6%. Each of the Big Four banks, as well as the market’s three major indices, are all hovering right around the break-even point — with some up, some down, and some sliding back and forth. Chalk this lackadaisical, can’t-make-up-my-mind attitude to jitters over the start of earnings season.

Wells Fargo & Co (NYSE:WFC)

Wells as bellwether
Second-quarter earnings season has actually kicked off already, with Alcoa Inc (NYSE:AA) reporting yesterday. The aluminum giant met or beat analyst expectations, but the stock is trading down today. There’s just no making some people happy.

On the financials front, both Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) are reporting their Q2 results this Friday. Alcoa Inc (NYSE:AA) is a closely watched stock since it’s traditionally the first company to report, but the market also keeps a close eye on the big banks, where the financial crisis kicked off five years or so ago.

Foolish bottom line
The country’s economic recovery is coming along nicely but is perceived to be fragile, and rightly so, for the most part. There have been too many times over the past few years when, just when it seemed some momentum was gathering, poof, away it went. Now, with the threat of the removal of quantitative easing, investor jitters are higher than ever.

Hence, a powerhouse industrial giant like Alcoa Inc (NYSE:AA) meets or beats expectations, but the stock still drops. It will likely be the same for banks this season: If investors don’t see world-beating numbers, they may temporarily flee the scene. And there is some reason be fearful, at least on a short-term basis, when it comes to the big banks.

Since the Federal Reserve announced a timeline for the tapering of QE, the bond markets have been in turmoil. As such, interest rates have risen, and Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) are the country’s two largest home lenders. Not only that, but rising bond yields mean lower bond prices, which means assets held on banks’ books are going to take a hit.

Last quarter, banks like Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) reported big earnings growth on little or no revenue growth. The only way to pull off that trick is to cut internal costs, but you can only cut away so much fat before you start cutting into muscle. Earnings growth without revenue growth is unsustainable. For Wells Fargo & Co (NYSE:WFC) and any of the other big banks, look for revenue growth for reassurance that your investment is on the right track.

The article 1 Reason Wells Fargo Is Trading Down Today originally appeared on and is written by John Grgurich.

Fool contributor John Grgurich owns shares of JPMorgan Chase. Follow John’s dispatches from the not-so-muddy trenches of big-banking and high-finance on Twitter @TMFGrgurich. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and (NYSE:JPM) Wells Fargo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.