Shares of Bank of America (NYSE:BAC), the nation's second largest bank by assets, are trading higher this afternoon following the unofficial start of earnings season.
Alcoa (NYSE:AA) kicked things off yesterday, offering a glimpse of how the nation's largest companies performed in the first quarter. While the aluminum giant beat on the bottom line, with earnings per share exceeding the consensus estimate, it came up short on the top line, with revenue falling by 3% on weak aluminum demand.
The true test for banks will come at the end of this week. On Friday, both JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) are set to report. Investors and analysts will be watching for three things in particular: mortgage origination volumes, expense reduction, and trading profits/losses. As I've discussed before, Wells Fargo is particularly important given the fact that it controls roughly a third of the nation's mortgage market.
Beyond earnings season, market participants are still working to parse yesterday evening's remarks by Ben Bernanke, the chairman of the Federal Reserve. Despite the abysmal jobs report at the end of last week, Bernanke noted that "The economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be."
And with respect to banks in particular, he said: "The resilience of the U.S. banking system has greatly improved since , and the more intensive use and greater sophistication of supervisory stress testing, as well as supervisors' increased emphasis on the effectiveness of banks' own capital planning processes, deserve some credit for that improvement."
For those hoping that the Fed chairman would signal an end to the central bank's quantitative easing programs, they were left disappointed. It seems safe to assume that banks like Bank of America will continue to struggle against monetary headwinds so long as inflation remains muted and unemployment heightened.
Despite this disappointment, bank stocks are generally up today, with the KBW Bank Index (DJINDICES:^BKX) trading higher by 0.7% at the time of writing.
John Maxfield owns shares of Bank of America. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. 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.