In this series, we'll explore the data announcements and events that may affect the performance of bank stocks during the upcoming week.
The past week has been an eventful one. With the recent news from the Federal Open Market Committee that there is a timeline for ending its current stimulus policy, the market took a nosedive -- and banks went right with it. With the coming week set to deliver more housing market news, the banks may stand a better chance at regaining some of the losses they sustained toward the end of this week. Let's take a look at what's in store for bank investors in the coming days.
- FHFA Home Price Index: Using data from Fannie Mae (OTC:FNMA) and Freddie Mac, this home-price index shows investors the current pricing information for conforming loans purchased by the two government-sponsored enterprises. This index can give bank investors a good idea of how prices are rising and the number of new conforming loans.
- New home sales: Last week we saw a 4.2% increase in existing-home sales from April to May. The new-home sales information will give a good reference to whether buyers are taking advantage of lower-priced existing homes and whether new construction is keeping pace with buyer demand. Bank investors will also be able to see how much new mortgage business has been able to walk through the banks' doors.
- Case-Shiller Price Index: We've been seeing home prices rise as demand beings to outpace current inventory. Though some have considered the rising prices to be a signal for trouble, this new rise may benefit banks by creating higher loan balances from which to generate interest income. Since some banks have noted a decrease in refinancing activity, the rising prices for new mortgages in the still-low interest-rate environment may help offset some of the lower volume in new-loan origination.
- Bank Reserve Settlement: Every two weeks, the Federal Reserve has a checkup with banks to see their capital balances. You may see some movements in the federal funds rate as banks lend to each other at the last minute to meet their requirements. There has been some talk of raising capital requirements to a flat 6% of a bank's assets regardless of size, leaving JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) to worry that their current reserves are far below the proposed flat rate. For now, however, there is little to worry about, as each of the banks has shown that they meet current requirements through stress tests.
- MBA purchase applications: This is a weekly look at the mortgage application activity from the Mortgage Bankers Association. We've seen a decline in the overall rate of new applications, largely because increasing interest rates are deterring new refinancing activity. But this week's numbers may reflect the upswing seen in other housing data released of late.
- Jobless claims: Though it's unlikely to happen for quite some time, Ben Bernanke noted that the Fed will begin to upwardly adjust the federal funds rate when unemployment hits the 6.5% mark. That stance puts added interest onto any new unemployment data. Expect to see some big reactions to next week's jobless-claims report, since an increase in new applications for unemployment benefits will be the opposite of what the Fed wants to see.
- Pending Home Sales Index: Showing the number of homes currently in the sales process, this index can indicate how buyers are feeling about the market and the availability of credit.
- Personal income and outlays: This data will provide an update for personal income levels as well as expenditure rates. Outlays include increases in savings, so even if people don't increase their shopping habits but do up the amount they put in their savings account, the banks are on the receiving end of that outlay -- increasing available capital for new loans and other revenue-generating products.
Throughout the week
A number of prominent Federal Reserve members are giving speeches or talks on the current economic environment, monetary policy, and the financial crisis this week. Any nuggets of information gleaned from these talks could provide good insight into future Fed policy.
- Dallas Federal Reserve Bank President Richard Fisher will give a speech on monetary policy in London.
- Minneapolis Federal Reserve Bank President Narayana Kocherlakota will present a speech on monetary policy to the Society for Economic Dynamics in Seoul.
- Federal Reserve Gov. Jerome Powell will speak about monetary policy at Bipartisan Policy Center in Washington.
- Atlanta Federal Reserve Bank President Dennis Lockhart will give a speech on the economic outlook in Marietta, Ga.
- Richmond Federal Reserve Bank President Jeffrey Lacker will present a speech on the economic outlook in White Sulphur Springs, W.V.
- Cleveland Federal Reserve Bank President Sandra Pianalto will speak about labor market trends and monetary policy in Wheeling, W.V.
- San Francisco Federal Reserve Bank President John Williams will give a speech on the economy at the Sonoma Economic Conference in Rohnert Park, Calif.
With all of the happenings of the past week, it's tough to know when the market may begin to level out. But as a long-term investor, being knowledgeable about the events and data releases that may affect your investments is a good place to start. But as always, keep an eye on the fundamentals of your investments and don't overwhelm yourself with information. Fool on!