Blue-chip stocks have mounted an impressive comeback this afternoon. After starting the day solidly in the red, the Dow Jones Industrial Average (^DJI 1.13%) has clawed its way back near breakeven. With roughly an hour left in the trading session, the index is down 12 points, or 0.08%.
The day got off to a rough start after Cyprus announced that it may confiscate a portion of bank deposits in an effort to raise funds for the country's bailout. The plan as originally conceived called for the small island nation to tax every depositor with less than 100,000 euros in the bank at 6.75% and those more than that amount at 9.9%. There have since been a number of proposed amendments that could change those figures. In the meantime, however, Cyprus has instituted an official bank holiday, closing its financial institutions until Thursday. To read more about this, click here.
Also fueling the bearish sentiment was a downbeat report about housing here in the United States. The National Association of Home Builders released its homebuilder confidence index today, showing a decline from 46 in February to 44 this month -- a reading of less than 50 suggests negative sentiment. This is the second consecutive monthly decline and purportedly owes to concerns that demand for new homes is exceeding the supply. While this could constrain sales over the short term, the broader improvements in housing over the last year are nevertheless positive for the long-term outlook.
The best-performing stock on the Dow today is Hewlett-Packard (HPQ 0.14%). Earlier today, an analyst at investment bank Morgan Stanley upgraded the tech company's stock from "equal weight" to "overweight," signifying that its future performance is expected to best the broader market. As my colleague Anders Bylund noted earlier, the reasoning behind the upgrade boils down to cash flow. Last November, the company projected $5 billion in free cash flow for the current fiscal year. The Morgan Stanley analyst, however, thinks the figure will come closer to $6.7 billion.
Either way, there's no disputing the fact that HP has struggled of late. Over the past two years, its stock has fallen by 46%, plummeting from about $42 per share in March of 2011 down to about $23 per share today. That being said, it has mounted an impressive rally over the last four months, nearly doubling since the end of November. And for the year to date, it's far and away the best-performing stock on the Dow, up by 56%.
Conversely, shares of JPMorgan Chase (JPM 1.54%) are lower on the heels of last week's dividend announcement and Friday's congressional hearing about the now-infamous "London Whale" debacle which cost the bank more than $6 billion in losses last year.
After the market closed on Thursday, the Federal Reserve released the results of its 2013 Comprehensive Capital Analysis and Review, which determined which of the nation's 18 largest banks would be allowed to raise dividends and/or share buybacks this year. While the central bank didn't formally object to JPMorgan's capital plans, which included a $6 billion repurchase program and an increase in its quarterly dividend from $0.30 to $0.38, it's nevertheless requiring the bank, along with Goldman Sachs, to submit "new capital plans by the end of the third quarter to address weaknesses in their capital planning processes."
To add insult to injury, a Senate subcommittee on Friday grilled present and former JPMorgan executives over the practices that led to the aforementioned $6 billion trading loss last year. By all appearances, the forum was designed to encourage regulators to aggressively clamp down on risky trading activities by banks holding insured deposits via the Volcker Rule, a provision of the 2010 Dodd-Frank Act. If regulators take heed, the impact on institutions like JPMorgan that look to trading for a significant portion of revenue could be severe.
