In this series, we'll explore the data announcements and events that may impact the performance of bank stocks during the upcoming week.
With the market at all time highs, and the banks on the rise as well, it's important for bank investors to keep tabs on the news announcements and data releases that could effect the direction your stock moves. With the coming week delivering a big dose of housing market news, this will be an important one for the banks, who need to see an increase in lending activity to maintain their profitability.
Let's take a look at what's going to be announced, what banks may be affected the most, and what you should look out for in the coming days.
- NFIB Small Business Optimism Index -- keeping the pulse of the small business community, the index provides some insight to investors on how business owners feel about the current state of the economy, their willingness to hire new employees, and comfort with new borrowing for operations. This is a particularly interesting index for the banks that look to business lending while the demand for mortgages flags. Bank of America (NYSE:BAC) has been the poster child for chasing small business, with a few of their new commercials featuring the strong partnership of the bank with local businesses.
- Housing Market Index -- The information found within this index is the monthly mother lode of the housing market data points. With both JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) reporting a drop in mortgage revenue during the first quarter, bank investors should be interested in this index for the data it can provide on current and pending home sales, the six-month outlook for home sales, and the flow of new potential buyers into the market. Since we've seen an uptick in some demand for refinancings, this data will give you a better sense of how much new (more profitable) mortgage business could be walking through the banks' doors.
- MBA purchase applications-- Last week we saw a rise in the purchase applications index of 7%, mostly driven by the continued rush to refinance while rates are at historical lows. With refinancings accounting for 75% of this index during the months of 2013, look for a declining trend that starts to favor mortgage business. That will be the turning point for both the banks and the housing recovery.
- Bank Reserve Settlement -- A bi-weekly checkup on the capital reserves of the nation's banks, the settlement can show investors who is struggling to catch up at the last minute. Since the capital plans for most of the big banks were approved and the Fed's stress tests showed most were overcapitalized, there's no real threat that any of the major players will be struggling to meet their requirements.
- Jobless claims -- We've seen how the labor market can influence the mood of Mr. Market overall. Since there was an unexpected drop in the unemployment rate a little over a week ago, a continued trend of declining jobless claims will most likely boost the markets as a whole, including the banks.
- Housing starts -- Much like the housing market index, this data point will provide a snapshot of the housing recovery -- a vital sector of the market for an overall economic recovery and a huge part of every bank's business. Look for more housing starts or work permits, which will show the work that's to start in the near future.
- Leading Indicators -- a monthly summation of ten economic data points that can show a current picture of the economy. Among those included are data points on consumer and business spending, as well as how interest rates are influencing borrowers. The last release of leading indicators posed some conflicting data, with the top credit index showing consumer and business spending on the rise, and continued low interest rates with a positive influence on borrowing demand, but there was little proof that demand was rising. Other indicators were clearly negative, with building permits in decline, factory manufacturing down, and rising unemployment claims.
So much data, so little time
As always, don't feel that you need to study up on all of the information released on any given week. Figure out what news is most important to your stock. For example, Citigroup (NYSE:C) might not be as effected by the housing data this week since it's not a huge player in the mortgage market, but jobless claims will affect it just the same as the other big banks. Take time to understand what you're looking at and if it really matters to the bank's fundamental operations. And as always, you can look for more coverage to help you along by logging on to Fool.com.