Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Financials Help Lift Dow to Record Heights As Goldman Sachs, JPMorgan Chase Lead

The Dow Jones Industrials (DJINDICES: ^DJI  ) set their third record close of 2014 Monday, with a gain of 112 points reflecting the strength of the overall market. The S&P 500 reached a new all-time record as well, and big-bank financial stocks were among the best performers in the stock market, with Goldman Sachs (NYSE: GS  ) and JPMorgan Chase (NYSE: JPM  ) in particular helping to lead the Dow Jones Industrials higher.

In general, banks both within the Dow Jones Industrials and outside it celebrated signs that the low-interest rate environment of solid but not extraordinary economic growth might continue well into the future. As the U.S. economy continues to fare better than many other major economies elsewhere in the world, U.S. banks have a potential competitive advantage in being closer to domestic corporations that need their services.

Flickr source.

Yet even though JPMorgan Chase stock rose 1.2%, the bank had a lot of mixed news Monday. On the business front, The Wall Street Journal reported that JPMorgan Chase was looking closely at its relationship with some of its banking-institution clients, which use JPMorgan to clear payments, process transactions, and provide other operational functions. The problem for JPMorgan is that these relationships can cause systemic and regulatory risk, and so some relationships might not be profitable enough to justify keeping as oversight gets tighter. Meanwhile, reports in the New York Post suggested that JPMorgan CEO Jamie Dimon might decide to leave the Dow component bank because of the adverse regulatory environment. Some would see such a move as a positive, but Dimon has played an important role in leading JPMorgan Chase's recovery. The fact that the stock defied negative analyst earnings revisions is also a positive sign.

Goldman Sachs climbed an even more impressive 1.5% as a Barron's report indicated that even in a challenging trading environment, the Dow component's revenue could still climb as long as the global economy keeps improving. As other banks choose to exit certain lines of business to avoid additional regulation, Goldman Sachs has an opportunity to gain greater market share if it decides to buck the trend and stay in those markets. Moreover, with Goldman's reputation, it's more likely to survive regulatory fallout than smaller companies with fewer resources to devote to compliance.

For the Dow Jones Industrials to keep climbing, financial stocks will need to keep supporting the overall market and the economy at large. As long as the bank components of the Dow Jones Industrials can maintain solid gains, then the Dow should be in good shape for the foreseeable future.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional bricks-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. To learn about about this company, click here to access our new special free report.

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

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: 2954484, ~/Articles/ArticleHandler.aspx, 8/29/2015 11:08:48 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...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 13 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

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

Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
GS $187.75 Down -0.81 -0.43%
Goldman Sachs CAPS Rating: ***
JPM $64.13 Down -0.35 -0.54%
JPMorgan Chase & C… CAPS Rating: ****