This Is Why Financial Stocks Are Floundering Today

Stocks are headed lower this afternoon as investors brace for a disappointing earnings season. The quarterly ritual unofficially kicks off after the closing bell today when Alcoa (NYSE: AA  ) , the nation's largest producer of aluminum, reports earnings for the fourth quarter of 2012. If the current direction of the market is any indication, then it may be wise to set your expectations low, as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down by 78 points, or 0.58%, as of 2:45 p.m. EST.

Among companies making news today, shares of both JPMorgan Chase (NYSE: JPM  ) and Bank of America (NYSE: BAC  ) , the nation's two largest banks by assets, are depressed one day after the companies reported a multibillion-dollar settlement resolving claims related to faulty mortgage-foreclosure practices.

The move came on the same day that the nation's largest lenders had to submit their 2013 capital plans to regulators as a part of the Federal Reserve's now-annual stress test. As I discussed over the weekend, this could end up being either an epic victory for B of A or a monumental defeat. Banks that fare well will be slated for approval by the Fed to raise their quarterly dividend payouts and/or initiate or increase share buyback programs, both of which would serve as potent catalysts for their share prices.

Speaking of epic victories, B of A simultaneously announced a $10.3 billion settlement with Fannie Mae over faulty mortgage sales. The deal eliminates the uncertainty surrounding the bank's potential liability for repurchase claims from the government-sponsored agency. Earlier last year, I had estimated these claims could range in liability anywhere between $4.7 billion and $40 billion. As a result, while yesterday's settlement was hefty, it was certainly better than it could have been.

Click here to see why my colleague John Grgurich thinks this settlement is the last shoe to drop for the nation's second-largest lender.

If these two massive occurrences weren't enough, moreover, Bank of America also announced yesterday that it had entered into an agreement with Nationstar Mortgage (NYSE: NSM  ) and Walter Investment Management (NYSE: WAC  ) under which the latter two mortgage servicing companies will pay a collective $1.8 billion for more than $300 billion in mortgage servicing rights from B of A. The deal is part of a greater effort by B of A to shed noncore assets and focus on its main customer base. Shares of both Nationstar Mortgage and Walter Investment Management soared on the news.

For those of you who have read my recent columns on B of A, like this one, you know that I'm an unabashed bull when it comes to the bank's stock. But to see why our senior banking analyst, Anand Chokkavelu, thinks the same thing -- predicting that its share price could double or triple over the next five years -- download our new in-depth report on the lender. You can access this valuable report simply by clicking here now.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2185176, ~/Articles/ArticleHandler.aspx, 10/25/2014 5:29:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement