Markets surged on Thursday for two reasons: the Bank of England held out the hope of financial stimulus measures and better-than-expected earnings from a key blue chip stock boosted bank shares. Benchmarks struck new records with the Dow touching its third consecutive all time high. The S&P 500 achieved an all time record for the fourth time in a row. This marked its longest record busting run since Nov 2014.
Bank of England Disappoints, Promises
The committee which determines rates at the Bank of England elected to keep the key lending rate unchanged at 0.5%. Investors were disappointed at this decision since England’s central bank was widely expected to reduce rates. A surprise verdict of the referendum on Britain’s relationship with the EU had sparked off such expectations. As a result, global stocks weakened for a short time.
However, the Bank of England was quick to clarify that most of its members were looking toward providing some form of monetary stimulus next month. This provided a much needed reassurance to investors who have expected such a move since the vote for a Brexit. This in turn has sparked off gains for assets with a higher risk profile, such as stocks. Expectations of monetary stimulus were largely responsible for a rebound in assets after the vote.
Impressive Bank Earnings
Investors continue to be circumspect about a stock surge built on expectations of monetary stimulus, instead of gains based on strong economic fundamentals. However, bank earnings threw in their weight behind the rally, adding to the day’s gains. The Financial Select Sector SPDR (XLF) surged 0.9% on Thursday. This comeback for stocks, which took the heaviest losses after the Brexit vote, was largely built on impressive results from J.P. Morgan Chase (JP).
JP Morgan’s second-quarter 2016 earnings of $1.55 per share easily exceeded the Zacks Consensus Estimate of $1.43. Managed net revenue of $25.2 billion in the quarter was up 3% from the year-ago quarter. Shares of Morgan Stanley rode this wave, gaining 3.1%. The SPDR S&P Bank ETF (KBE) moved up 1.6%.
5 Banks Moving Higher
The XLF is still down 1.3% year to date and remains the lone S&P 500 sector in the red for the year. Earnings as impressive as JPM’s will give a further boost to bank stocks. They however continue to struggle under a low interest rate regime.
But stimulus from the Bank of England could well add to the positives for the sector. Below we present those banking stocks which notched up strong gains on Thursday and also boast a Zacks #1 Rank (Strong Buy) or Zacks #2 Rank (Buy).
First Horizon National Corporation (FHN - Free Report) is a financial services company based in Memphis, TN.
First Horizon National, a Zacks Rank #2 stock, increased by 1.8% on Thursday. Its estimated growth for the current year is 13.4%. The company’s earnings estimate for the current year has increased 1% over the last 30 days.
MB Financial Inc. is a bank holding company which conducts a commercial banking business through Manufacturers Bank.
Zacks Ranked #2 MB Financial’s shares increased by 1.6% on Thursday. Its estimated growth for the current year is 8.3%.
United Community Banks, Inc (UCBI - Free Report) is a holding company for United Community Bank, via which it provides services to individual and business customers.
United Community Banks has a Zacks Rank #2. Its shares increased by 1.4% on Thursday. Its estimated growth for the current year is 12.3%.
State Bank Financial Corporation through its subsidiary provides community banking services to individuals and businesses in the middle Georgia and metropolitan Atlanta markets.
Zacks Ranked #2 State Bank Financial also saw a 1% rise in its shares on Thursday. Its estimated growth for the current year is 19.9%. The company’s earnings estimate for the current year has increased 2.5% over the last 30 days.
First Midwest Bancorp Inc (FMBI - Free Report) is the bank holding company for First Midwest Bank via which it offers a range of products and services related to banking.
First Midwest Bancorp, a Zacks Rank #1 stock, increased by 1% on Thursday. Its estimated growth for the current year is 5.5%.
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