This Week in Finance: Wells Fargo, Bank of America, and 3 Others

Traders Uncertain About Direction of Interest Rate Related Equities in the Near-Term

Although modestly-higher interest rates would almost certainly help Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and E*TRADE Financial Corp (NASDAQ:ETFC) make more in interest income, traders were a bit uncertain of whether the stocks would do well in the near-term last week. That uncertainty manifested in the poor price action on Bank of America and JPMorgan’s stocks on Friday, which fell by 0.69% and 0.91% respectively.

After initially rallying on what can be interpreted as hawkish comments from Boston Federal Reserve President Eric Rosengren, shares of the two banks fell due to the broader market weakness. Apparently the good news of potentially-higher interest rates sooner rather than later wasn’t enough to overcome the broader market panic on what higher interest rates might do to corporate buybacks and consumer buying activity in other sectors. The Dow and S&P 500 each fell by over 2% on Friday. If the broader market continues to fall, the three interest rate-sensitive stocks might not be able to remain in the green in the near-term, no matter how strong their relative strength might be.

In the long-term, however, many investors are confident about Bank of America, JPMorgan and E*Trade’s prospects, as companies that typically make more in EPS and return more capital back to shareholders will generally have higher share prices.

The hedge funds in our database added to their JPMorgan holdings on aggregate during the second quarter, as 99 of those funds owned $7.24 billion of JPMorgan Chase & Co. (NYSE:JPM) shares, which accounted for 3.20% of the float on June 30, versus 97 funds with $6.93 billion in JPMorgan shares on March 31.

Meanwhile, the smart money was less optimistic on Bank of America in the second quarter. 102 funds had a bullish position in Bank of America Corp (NYSE:BAC) at the end of June, down by eight funds from the end of March.

Last but not least, an esteemed fund became more bullish on E*Trade in the second quarter. According to SEC filings, Leon Cooperman‘s Omega Advisors raised its stake in the stock by 28% to slightly over 3.1 million shares of E*TRADE Financial Corp (NASDAQ:ETFC) during the quarter. Cooperman’s firm was one of 35 in our system long the stock on June 30.

Disclosure: None