Scalper1 News
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. Scalper1 News
Scalper1 News