In this series, we'll explore the data announcements and events that may affect the performance of bank stocks during the upcoming week.
This weeks has been a tough one for America's bank stocks. With three separate reports showing a weakening labor market, investors are unsure whether banks can continue growing their loan portfolios, or if consumer spending and saving will fall. Let's take a look at next week's data announcements that may help the banks recoup some of their losses from this week.
- NFIB Small Business Optimism Index: Investors should take a close look at this month's survey of small business outlook since much of the information provided may point to changes in the labor market as well as business growth. Giving insight into how businesses plan to spend, hire, and expand are truly important to banks who work with small businesses -- like Bank of America (NYSE:BAC). The bank has been trying to extend itself to small businesses, especially in its backyard of Charlotte, NC. If we continue to see a slowing labor market, business lending may become an important form of growth for the banks.
- MBA purchase applications: Mortgage applications fell 4% last week, disappointing bank investors who had hoped the prior week's improvement would become a trend. Refinancing applications were also down 4%. Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM) were among the leaders of the mortgage originations during the second half of 2012, and without continued growth in applications, their record profits will not continue to grow. On the upside, year-over-year growth in applications is up 4%, which does match the trend seen in home sales.
- Federal Open Markets Committee minutes: The last time that the FOMC released its minutes, bank shares tumbled because of rising concerns that the Fed's QE policy would end sooner than expected. The minutes showed there was a growing number of members concerned with the cost of continuing the policy. But with the recent meeting's results (no changes to policy) there may be less to worry about this time around. Since the policy is in effect for the purpose of driving increased job growth in the economy, this past week's labor market data may generate more interest in what the minutes have to say.
- Jobless claims: Since this week was a disappointing one for the labor market, bank investors may want to pay special attention to next week's jobless claims. It's the only labor market data being released, so it will have a big impact on sentiment toward the overall economy.
- Bloomberg Consumer Comfort Index: Considering the importance of consumer spending and saving to banks, this week's consumer comfort index may be important to follow. The index surveys the feelings of selected consumers about the overall economy, their finances, and their intentions of buying goods or services. With the labor market weakening, consumers may begin to tighten their belts, with new loans at the bottom of their priority lists.
- Consumer Sentiment: Much like the Bloomberg index on Thursday, the Consumer Sentiment survey from the University of Michigan gives insight into how the average consumer is feeling about the economy, what they are doing with their money, and how they feel about spending. Since the banks need to generate new loans, a decrease in spending will likely impact their revenue generation, but may increase consumer savings (depending on discretionary cash levels), leading to more capital available for lending.
A Foolish investor knows that no single news blip will have all the information needed to assess a stock, but too much information can muddle a decision just as easily. As we move through the week, be sure to pick and choose which data points best help or hurt your stock picks. And as always, you can learn more by logging on to Fool.com.
Fool contributor Jessica Alling has no position in any stocks mentioned -- you can contact her here. The Motley Fool recommends Wells Fargo and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.