Banks Are Among Dow's Winners

A handful of economic reports had seemed ready to spare the Dow Jones Industrial Average (INDEX: ^DJI  ) from a fourth consecutive day of declines, but as of 2:50 p.m. EDT the blue-chip index sits just below breakeven, down about 2.5 points, or 0.02%. Investors are still hopeful the Dow can finish the day up.

What's moving the Dow?
The most significant news for the day comes courtesy of two reports from the federal government. First, early this morning, the U.S. Department of Labor released its estimates for jobless claims last week. While economists had predicted the number to come in around 370,000, the actual figure was 339,000. That's 30,000 fewer applicants than in the preceding week, dropping the four-week moving average to 364,000 -- the lowest level since March.

Second, the U.S. Department of Commerce provided an update on the country's trade balance. According to its estimates, the deficit widened in August to $44.2 billion, up 4% from July's $42.5 billion deficit. Notably, while both imports and exports decreased for the month, the former did so at a slower pace than the latter.

Banks lead the Dow higher
Banks are among the biggest winners on the Dow today, as shares in JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) are up 0.3% and 1.1%, respectively. The impetus for the move was news that the European Commission is urging lawmakers to postpone the release of detailed regulations governing bank liquidity. The new rules are expected to increase the liquidity coverage ratio to ensure that lenders hold enough immediately sellable assets to survive a 30-day funding squeeze.

In addition, executives at both banks made headlines today. Speaking to a Bloomberg reporter at the semiannual meetings of the International Monetary Fund and the World Bank in Tokyo, Bank of America CEO Brian Moynihan gave varying signals about the state of the economy. On the one hand, he noted that the bank's clients and customers "don't expect to hire a lot more people because of the amount of uncertainty in the market." On the other, with respect to housing, Moynihan observed that "everything we see points that the worst is over, from the amount of delinquent loans, to the amount of seriously delinquent loans, to the amount of backlog homes that are still going through the process."

In Washington DC, meanwhile, JPMorgan CEO Jamie Dimon caused a stir after telling a group of business leaders that he "did [the government] a favor" by buying investment bank Bear Stearns in 2008 and that he wouldn't do it again. While JPMorgan only paid an estimated $1.5 billion for the ailing investment bank, Dimon estimates the deal has since cost his bank up to $10 billion. Just to provide some context, there are two things to note about this. First, despite his presumed protestations to the contrary, Dimon owes his job to the government's 2008 rescue of the financial industry. And second, it was recently announced that JPMorgan is being sued by the government for many of Bear's alleged misdeeds preceding the crisis.

Alternatively, heading lower for the day are entertainment company Walt Disney (NYSE: DIS  ) and telecom giants Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) . As my colleague Anders Byland discussed earlier, Disney is down 1.5% after investors learned that Stan Lee Media is suing the entertainment company, claiming that it's unlawfully profiting off of Marvel comic characters. And the biggest news in the telecom space concerned the possibility that Japanese mobile carrier Softbank may make an offer to purchase Sprint. Needless to say, this could increase competition in the space for the likes of AT&T and Verizon.

Foolish bottom line
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John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Bank of America, Walt Disney, and JPMorgan Chase & Co. Motley Fool newsletter services recommend Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 11, 2012, at 4:08 PM, Hestheone wrote:

    JP Morgan Chase has a derivative exposure of $70.151 Trillion dollars.

    $70 Trillion is roughly the size of the entire world's economy.

    Yeah, Wall Street is legit.

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