- After a hot inflation report earlier this week, the Dow rose today.
- The Fed’s Hawkish Members publicly stated that they support a 75-basis point rate increase later in the month.
As part of today’s Dow relief rally, investors bought stocks in a particular sector.
Today’s Dow Jones Industrial Average surged 658 points, thanks to investors responding favorably to earnings reports. Fed rate-setting committee members made less hawkish comments than investors had feared.
Today, several major banks reported positive earnings, which indicated that both consumers and businesses were strong during the second quarter. It ended in June. UnitedHealth Group ( UNH 5.44%) was at the top of the Dow, with shares rising nearly 5.5%. Earnings beat estimates by analysts, and the company also increased its full-year guidance.
Additionally, Fed Gov. Fed Gov. Investors were concerned that a rate hike of one-quarter percent might be possible after a hot inflation report was released earlier in the week.
Apart from UnitedHealth, there was a consistent theme in stocks that investors bought today, which helped drive the Dow’s huge day.
Today’s Banks Gain
Strong earnings reports from Citigroup C 13.23%) and Wells Fargo WFC 6.177%, as well as other regional banks, helped bank stocks in Dow take off. They finished the day as the Dow’s top four finishers.
JPMorgan Chase ( JPM 4.6%) closed the day 4.6% better after yesterday’s stock sell-off. Yesterday, JPMorgan’s second-quarter earnings results were below analyst expectations. The bank also suspended share repurchases due to the need to raise capital to meet its higher regulatory capital requirements for 2023/2024.
JPMorgan reported that commercial and consumer customers remained healthy in the second quarter. This theme is reflected in today’s bank earnings reports.
The earnings of large investment bank Goldman Sachs ( GS 4.36%) were 4.4% higher than the previous quarter, clearly riding the bank earnings surge. Goldman Sachs’ earnings are likely lower than expected, as banks have reported lower investment banking revenue this quarter. Investors were concerned, and investors’ worries may be dispelled by the fact that trading revenue and consumer lending have been strong. Goldman will make Monday’s report.
The credit card and payments company American Express ( AXP 4.40%) grew 4.4% today. Investors are optimistic about its future earnings.
In Q2, credit card growth was extremely strong. JPMorgan reported that credit card balances rose 9% in the second quarter. Citigroup, however, saw its branded card balances increase by 4%.
Bank stocks to buy?
After this year’s sell-off, I love the banking sector, and I recommend that investors consider JPMorgan Chase, Goldman, and American Express. The Great Recession is over, and banks will soon enjoy the highest rising interest rates since then, and this should be good news for their loan business.
A recession is not a good thing for the sector. Jamie Dimon, CEO of JPMorgan Chase, noted that consumers would enter one with less leverage and better than the Great Recession and the pandemic.