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Will Banking Stocks Turn The Corner? Keep Eye On Goldman, JPMorgan, Yirendai

Is the financial sector ready to help hoist the stock market higher, at last? One may think so, given investors’ generally warm reaction to the quarterly reports issued so far this week. The SPDR Financial ( XLF ) sector ETF is having a strong start to the second quarter, finishing Thursday trade up 3.7% since April 1. Yet many of the individual household names in the sector still have a lot of repair work left in their stocks. Over the past five trading sessions, energy, metals and agricultural stocks have paced the market’s gains; many of these commodity-driven groups among IBD’s 197 industries tracked are up 4% to 5% or even more. But if you sift through the winning groups, out come three financial groups worth further study: money center banks, super regional banks and consumer loans. Among those three groups, the consumer loans group is the best performer, up more than 1% year-to-date. In that group, Southfield, Mich.-based Credit Acceptance ( CACC ) boasts at least 19 quarters in a row of double-digit EPS growth and five straight quarters of accelerating revenue growth. A $4 billion market cap makes it the fifth largest in the group. Yet the stock’s action since October has a bungee cord-like feel, and Credit Acceptance needs to rise a lot more before a potential new base is completed. For the stock picker, the money center banks may deserve more focused attention, due to their heft in the stock market today and huge influence over the economy. The group still shows a lowly group RS ranking in terms of six-month performance; in Thursday’s IBD, the banking subgroup ranked 167th out of 197, yet it’s now almost positive for the year. Leading the way are major Canadian lenders including Bank of Montreal ( BMO ) and Toronto Dominion ( TD ), recently featured in the IBD Global Leaders column. JPMorgan Chase ( JPM ), fresh from posting better than expected Q1 results last week, retook its 200-day moving average this week. This is a key step in developing a proper buy point. It needs to hold above the long-term moving average line and approach the 68-69 price level, where the stock has met frequent upside resistance. What could be the catalysts for a further move up? One big factor would be a more steeply sloping yield curve. The bigger the slope, the more the JPMorgan and other lenders can benefit from the cost of attracting deposits and the rates it charges on residential mortgage and commercial loans. On April 13, JPMorgan posted a 12% rise in net income at its consumer and community banking division; overall lending bulged 11% to $847.3 billion. As noted in Tuesday’s IBD, the largest U.S. bank surprised analysts with solid gains in consumer loans. The stock’s RS Rating has risen dramatically, from 39 to 61 in less than three weeks. The rating can be seen in IBD Stock Checkup . Keep an eye on Goldman Sachs ( GS ), also a giant in the money center group, and Bank of New York-Mellon ( BK ), which shot past its 200-day line after reporting a 10% lift in earnings to 79 cents a share, its fifth straight quarter of double-digit profit growth. IBD’s super regional banks group is still in the red since Jan. 1; Great Western Bancorp ( GWB ) of Sioux Falls, S.D., is the sole stock in the 12-member group with EPS and RS ratings of 80 or higher. Great Western finished Thursday 4.7% past a 28.10 cup-with-handle entry, barely in buy range. Returning to the consumer loans group, three stocks in it now have a Composite Rating of 80 or higher, including Yirendai ( YRD ). The Chinese new issue is an online consumer financing marketplace trading roughly 6% above its IPO debut at 10 a share. The small-cap name (over $600 million market cap, $209 million in 2015 revenue) has grown the top line 1,327%, 1,561%, 630% and 279% vs. year-ago levels in the past four quarters.

Amazon.com Shutters Flash-Sale Fashion Site MyHabit

E-commerce leader  Amazon.com ( AMZN ) is shutting down fashion flash sale e-tail website Myhabit.com, first reported by  Women’s Wear Daily  and confirmed by Amazon. The website’s employees were told Thursday morning that the site would shut down at the end of May, WWD reported. In a statement, Amazon said, “Fashion is one of Amazon’s fastest-growing categories. As we continue to increase our breadth of selection and improve the customer experience on Amazon.com, we have decided to simplify our offering and will be closing MyHabit at the end of May. “Our customers can now shop from Amazon Fashion’s incredible assortment of brands across clothing, shoes and accessories — backed by award-winning service, free shipping and returns, and exclusive benefits for Prime members.” Analysts have told IBD that apparel has not been a strong category that Amazon. Alibaba ( BABA )-backed Shoprunner — an e-tail site — has told IBD that one of the ways to compete with Amazon.com’s market dominance is to find categories where the firm is not strong. In-season, branded apparel is one such category, Shoprunner spokespersons said. Amazon.com stock fell a fraction Thursday, to 631. The company has a good IBD Composite Rating of 85, where 99 is the highest. The IBD Leaderboard stock is 4.6% extended, and thus at the high end of the buy range, from a cup-with-handle breakout at a 603.34 buy point, and is near a secondary buy point, at 638.16.

Microsoft Misses March-Quarter Views On Sales, Earnings

Microsoft ( MSFT ) late Thursday reported fiscal third-quarter sales and earnings that missed Wall Street’s targets, prompting investors to sell off shares of the software giant. The Redmond, Wash.-based company earned 62 cents excluding items, flat with the year-earlier quarter, on sales of $22.08 billion, up 2%, in the quarter ended March 31. Analysts polled by Thomson Reuters expected 64 cents EPS and $22.09 billion in sales. Microsoft stock was down more than 3% in after-hours trading, following the earnings release. During the regular session, Microsoft rose a fraction to 55.78 on the stock market today . Microsoft stock had been trading just below its all-time high of 56.85, reached on Dec. 29. Microsoft was scheduled to give current-quarter guidance on a conference call with analysts later Thursday. For the June quarter, Wall Street was modeling for Microsoft to earn 66 cents a share, up 10%, on sales of $23.04 billion, up 4%. Investors have been upbeat over Microsoft’s transition from desktop software to Internet cloud computing services, such as Azure, Office 365 and Dynamics CRM Online. Microsoft’s commercial cloud business in Q3 reached an annualized revenue run rate of over $10 billion. “Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner,” Microsoft CEO Satya Nadella said in a statement. “As these organizations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10.” Under generally accepted accounting principles (GAAP), Microsoft reported earnings per share of 47 cents, down 23% year over year, on sales of $21.73 billion, down 6%. Microsoft’s non-GAAP results included a $1.5 billion revenue deferral primarily related to Windows 10. Excluding the impact of foreign exchange rates, Microsoft’s sales would have been up 5% in Q3 on a non-GAAP basis. Of Microsoft’s three business segments, Intelligent Cloud was the top performer. Sales in the unit grew 3% (up 8% in constant currency) to $6.1 billion. The Intelligent Cloud segment includes server products and services such as Windows Server, SQL Server, System Center and Azure. Microsoft’s Productivity and Business Processes unit saw sales rise 1% (up 6% in constant currency) to $6.5 billion. Office 365 consumer and commercial offerings and Dynamics CRM Online were big contributors in the quarter. Microsoft’s More Personal Computing unit increased sales by 1% (up 3% in constant currency) to $9.5 billion. The unit includes Windows software, PC and phone hardware, Bing search and Xbox gaming.