US bank stocks are flying high, and this week’s earnings could give investors more reason to be optimistic about the sector.
Strong results from JPMorgan Chase & Co on Friday bolstered expectations for top US banks, many of which are due to report in the coming week, including Citigroup and Goldman Sachs.
Financials have been among market leaders in the recent rally, with the Standard & Poor’s 500 posting its seventh straight week of gains on Friday.
While the earnings outlook is keeping alive hopes that stocks have more room to run higher, the rise in bank shares has pushed sector indexes to near resistance levels, which could signal a rest stop for the shares in this holiday-shortened week.
The market will be closed today in observance of Martin Luther King Jr Day.
JPMorgan Chase on Friday reported profit and revenue that were stronger than analysts had expected, and its chief executive Jamie Dimon said it could start to increase its dividend once regulators give the go-ahead, likely at the end of March.
Analysts said the news bodes well for other financials, most of which are due to report results this week.
“Financials could very easily be one of the real darlings of this particular earnings cycle,” said Burt White, managing director and chief investment officer of LPL Financial in Boston.
Financials are projected to have by far the highest growth rate in earnings for the fourth quarter, largely because of easy year-ago comparisons, according to Thomson Reuters data.
Overall, S&P 500 earnings are expected to have increased 32 per cent from a year ago.
Besides the banks, economic bellwether General Electric as well as marquee tech names Apple, Google and eBay are due to report.
Among other top banks reporting this week are Morgan Stanley, Bank of America and Wells Fargo & Co.