After starting out the year like it was riding a bucking bronco, a stretch of relative calm has hit the markets. Yesterday the Dow eked out a mild gain even though retail sales disappointed, growing by 0.1% when experts were expecting a slightly more robust 0.3% gain. Here's a snapshot of how the Dow and other indices performed:
|Dow Jones Industrial Average (INDEX: ^DJI )||+21.57 [+0.17%]||12,471.02|
|Nasdaq (INDEX: ^IXIC )||+13.94 [+0.51%]||2,724.70|
|S&P 500 (INDEX: ^GSPC )||+3.02 [+0.23%]||1,295.50|
However, today could see volatility resuming in the markets as earnings season shifts to the sector that's been driving market panics for years running. Yes, it's time for banking to shift into the spotlight.
Banking on tap
Foremost on the minds of investors today will be Dow component JPMorgan Chase's (NYSE: JPM ) earnings. The company is expected to post earnings of $0.91 per share when it releases earnings at 7 a.m. today, which is a healthy drop from $1.12 last year. However, what might be more meaningful are CEO Jamie Dimon's comments about Europe or any insights into the state of the credit markets in the United States.
Previously, Dimon had pegged JPMorgan's net exposure to the PIIGS countries of Europe at $15 billion. Investors are right to take bank exposure figures with a grain of salt after their poor track record accounting for loan risks in recent years, so additional commentary from Dimon will be scrutinized. In the next week, most other banks will report -- including Dow peer Bank of America, which has already gained 22% on the year -- but JPMorgan should set the tone for banking's earnings season and could erase sectorwide gains if its earnings bring more uncertainty to the sector.
One big loser for the day
One surefire loser on the day will be Metabolix (Nasdaq: MBLX ) . The small bioscience company announced that Archer Daniels Midland is ending a joint venture with the company because of concerns over cost and uncertain returns. While Metabolix will explore new options to commercialize the bioplastics at the heart of the JV, the loss of a deep-pocketed partner is a major body blow that sent shares down 40% in late after-hours trading.
Keep on the lookout for better ideas
While JPMorgan will be hogging the day's attention, there are plenty of better ideas out there that can continue profiting even if woes in Europe keep weighing down banking. For another smart stock idea, check out The Motley Fool's latest special report to discover our top stock pick for 2012. It's free, but it won't be available for long, so get your copy now.