Market Cheers Bank of America (BAC) Surprise on Busy Earnings, Data Day

US stock futures are up almost 0.5% Thursday morning, tacking on further gains after Bank of America (BAC) turned a surprising profit in Q4 2011. The downtrodden bank reversed a loss from the year earlier, earning $2 billion by selling debt and offloading its stake in a Chinese bank. These revenue sources offset losses in investment banking and higher legal expenses related to mortgages. The stock is more than 5% higher pre-market.

The banks have keyed much the recent rally, and today it looks like that will continue. After selling pieces that don’t fit into its basic banking model, many were expecting BAC to turn a profit, but the realization of that goal seems to be welcomed by the skeptical market. BAC serves almost half of American households, so its results can be seen as a barometer for the American consumer.

Morgan Stanley (MS) is also almost 5% higher this morning after reporting a smaller than expected loss in the fourth quarter of 2011. Analysts had expected the bank to lose 57 cents per share, but the number came in at 15 cents.

The earnings report by Goldman Sachs (GS) yesterday was mediocre at best, but it was not calamitous as the market seemed to fear. GS bounced slightly pre-market after its report, and took off after the opening bell gaining almost 7% by day’s end. For the last two years the market has been able to rally at times with the banks providing a headwind, and participation by the sector would be a major positive for bulls.

Slightly higher this morning as well is Southwest Airlines (LUV) who reported a 32% rise in sales and 16% rise in net income.

On the flipside of things, BankUnited (BKU) is down almost 12% after appearing to reject overtures from potential acquirers. The Wall Street Journal reported this week that the company has received two bids, but instead plans to remain an independent institution.

Across the pond, things went smoothly overnight as well. Greece continues to work with creditors toward a settlement to avoid a disorderly default. The market know that Greece, in some form, will be essentially defaulting on much of its debts, and is still treking higher. Expectations exist that the IMF and central banks will do what it takes to shore up liquidity in the global economy in such an event. Also, debt auctions in France and Spain went smoothly and did nothing to cause alarm.

In addition to being a heavy earnings day, Thursday packs a busy economic calendar. At 8:30 am ET, consumer prices, housing starts and jobless claims will released. Last week we saw jobless claims come in higher than expected, breaking a recent trend of improvement in the employment picture. Revisions could take that number back above the closely-watched 400,000 level. Following those announcements, the Federal Reserve Bank of Philadelphia with report on January manufacturing activity.

In addition to this morning’s earnings, we saw solid reports last night out of F5 Networks (FFIV), Linear Technology (LLTC) and Xilinx (XLNX) to keep the bid going in tech.

This market started the methodical bull move on December 20th, and has now started to turn into a Momentum Bull Run. This is music to my ears, as active traders love action, especially when you can hold multiple longs and add shares in key action areas for cash flow every few days. Markets have given you a lot to embrace, as dips have been buyable and shallow.

We also have participation from multiple groups with various break outs. Some would like “better volume” but you must take what you get in this world and market we live in! Tonight we have a ton earnings to sort through, including International Business Machines (IBM), Intel (INTC), Intuitive Surgical (ISRG) Microsoft (MSFT), American Express (AXP), Capital One (COF) and Google (GOOG).

Tune into my Radio around 3:30 and will go over potential individual strategies and thoughts for each.

Disclosures: Scott Redler is long SPY, OIH, XLF, AAPL, NFLX, CSCO, QCOM, RIMM, LNKD, CROX, POT, RENN, WYNN, and GOOG calls, and VXX. Short DIA.

About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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