With the entire banking sector cashing in on the good vibes created by Friday's jobs data, it's no surprise that stalwart Wells Fargo (NYSE:WFC) is leading the pack higher this morning. Surpassing its 52-week high mark earlier in trading, the San Francisco-based giant has dipped slightly but is still up 1.45% for the day so far.
Jobs, jobs, and more jobs
Friday's employment situation report from the Department of Labor Statistics confirmed some of the labor data we'd gotten earlier in the week. More than 200,000 jobs were created, signaling that the job market is finally increasing hiring. Layered on top of that good news was another win for investors -- though more jobs were added, the unemployment rate stayed steady at 7.6%. Since Mr. Market has been focused on any sign that the Fed will begin its tapering of the current stimulus policy, the flat unemployment rate kept the target 6.5% at arm's length.
With the report also showing an increase in labor market participation, meaning a higher rate of people actively looking for work, investors may have a while longer to wait before the unemployment rate really starts to shrink. A new influx of workers looking for jobs will continue as reports of an improving labor market sparks optimism for people who haven't been participating, but it is unlikely that they will immediately get work and will instead buffer the unemployment rate from falling.
A stronger labor market is a win for the banks, as increased personal income is likely to increase consumer spending and demand for borrowing. And a bolstered unemployment rate is also a win as investors stay calm knowing that the Fed's target rate is not in sight yet.
Wells is scheduled to report earnings later in the week, along with fellow mortgage leader JPMorgan Chase (NYSE:JPM). As the economy continues to rebound, investors may be looking for signs of new demand -- making revenue growth one of the key indicators during this earnings season. Both banks will likely note a decrease in new refinancing activity due to higher interest rates, but it will be important for investors to pay attention to how the banks are offsetting the decrease in revenue from those operations.
The coming quarters will be especially important for bank investors to follow, with changes in rates and other volatility likely to create new challenges and opportunities for the banks. With the second quarter representing the start of these changes, it will be important for you to follow Wells' earnings report and see if the bank still meets your investment requirements, because any uncertainty you may have now will only increase as more changes come to pass.
Keep an eye out later in the week for more coverage of the big banks' earnings reports as well as other earnings season coverage on Fool.com.
Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of 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.