In this series, we’ll explore the data announcements and events that may affect the performance of bank stocks during the upcoming week.
The economic turmoil in Europe hasn’t been friendly to American bank stocks this week. With the uncertainty in Cyprus and Italy, added investor concern has put pressure on recent gains that banks have made in the past few weeks. And though it’s not completely behind us, the uneventful reopening of the Cypriot banks does give hope that U.S. banks will be able to rely on economic news for boosts in the coming week. Here’s a look at what will be released, what banks may be affected, and what investors should expect.
Motor-vehicle sales: Auto sales are an important indicator of consumer confidence in the economy. Generally, consumers will hold off on large purchases if there’s a great deal of uncertainty. And while we usually focus our attention on mortgage loan data, most banks also have a dealer services division that provides consumer auto loans. Since mortgage activity was down this month, it may be important to keep an eye on other revenue-producing operations within the banks. Since Wells Fargo & Co (NYSE:WFC) was the largest mortgage originator in 2012, the recent slowdown of mortgage applications may be putting pressure on its other divisions to increase loan production.
Construction spending: A macro look at the pace of construction, this data point gives a broad view of how the construction industry is growing. This gives bank investors a sense of how new-home construction — and, by degrees, mortgage originations — may be growing as well.
Bank reserve settlement: It’s that time again. Every two weeks, the nation’s banks have to settle up with the Federal Reserve to meet capital reserve requirements. And while others may be scrambling to gather enough cash, Citigroup Inc (NYSE:C) is probably sitting pretty following its top ranking in the Fed’s stress test in terms of capitalization. Since banks may have to borrow from one another, the Fed funds rate may be affected, but don’t expect any change to stick.
MBA purchase applications: With a resurgence in refinancing and home-loan applications this week, bank investors should watch to see if there’s a new pattern emerging following a few weeks of lost ground. JPMorgan Chase & Co. (NYSE:JPM) , the second largest mortgage originator in 2012, will be happy to have some increased activity in its loan department. But JPMorgan Chase & Co. (NYSE:JPM) investors should be cautious when considering this data point, as the bank has some other major factors depressing its share price.