On Wednesday the Fast Money traders took a long hard look at bank stocks after JPMorgan rattled investors with some unexpected results.
On the surface the profit report looked fine – good even. The bank topped expectations due to solid growth in investment banking fees and a drop in credit card losses.
But dig down and investors unearthed some rather unpleasant nuggets. “Loan growth was anemic,” says traders Karen Finerman.
Also, real estate woes still lingered with CEO Jamie Dimon, saying the bank’s mortgage losses were “extraordinarily high.” And, "the losses will continue for a while.”
Those issues could also be troublesome for other banks; and a slew of them are about to flood the Street with their latest results.
Take a look at what's coming:
Monday: Citi, KeyCorp
Tuesday: Goldman, USB, Regions
Wednesday: Huntington, Wells Fargo
Thursday: BB&T, Morgan Stanley, PNC, First Third
What should you be watching? How should you position?
Instant Insights with the Fast Money traders
Trader Brian Kelly is bearish. After digging down into the numbers he, too, found loan growth to be an issue.
Behind The Numbers: JPM Loan Growth
1Q 2010: Commercial Loans + 1.3%
4Q 2010: Commercial Loans + 0.8%
"Loan growth just isn’t there," he says. To support his thesis he points to the latest survey by the NFIB which shows small business grew less optimistic about the economy in March. “That’s where the growth needs to come from. Large corporations have plenty of access to capital. It’s the small businesses that really need to start picking up. I’m short the XLF,” he says.
Trader Pete Najarian concedes that banks may be challenged. Not only is he concerned about growth but he’s also troubled by dividend yields. “The problem is yields are not back,” he says. “Look at Canada at banks such as Bank of Montreal and you’ll find 4% to 4.5% dividend yields.” He says here in the states bank stocks don't generate nearly that much yield. “I would not short them, but that’s the problem going higher,” he says.
Despite the poor loan growth, Karen Finerman sees more positive than negative in the JPMorgan earnings. She says she still likes JPM stock and calls it “attractively priced.” Trader Stephen Weiss echoes Finerman’s bullish outlook for JPM. “I don’t know why investors would go anywhere other than JPMorgan,” he says.
Joe Terranova sees a downstream opportunity in the JPM results. He suggests taking a second look at the drop in credit card losses mentioned above. “I think that’s a (positive) read through for Mastercard and Visa ,” he says.
Trader Steve Grasso is focused on Citi . But he’s waiting for the reverse split. “I believe that Citi will be higher a couple years from now but I don’t think it will be able to withstand the pressure from the reverse split. I’m waiting to put money into this name.”
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S&P 500 RIGHT AT 50-DAY MOVING AVERAGE
Meanwhile, the Fast traders were also closely watching the technical action in the S&P, which closed right at 1314, the 50-day moving average.
What should you make of it?
Guy Adami is negative broadly. He thinks the most likely move is lower, and expects the S&P to slip to 1300. However he also says if the bulls can get a foothold and the market closes above 1325, then technicals suggest the bulls can drive the S&P to 1350.
Trader Steve Grasso adds that weakness in the S&P could present issues for banks. With the broad market coming under pressure, he expects the tape will drag financials lower.
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Trader disclosure: On April 13, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Weiss owns (COP); Weiss owns (DVN); Weiss owns (HK); Weiss owns (HPQ); Weiss owns (MSFT); Weiss owns (AKAM); Weiss owns (TBT); Weiss owns (GDX); Weiss owns (UUP); Weiss owns (DRR); Weiss owns (HBAN); Weiss owns (KEY); Weiss owns (QCOM); Weiss owns (BTU); Weiss is short (IWM); Weiss is short (X); Weiss is short (AKS); Weiss owns (AAPL) calls; Seymour owns (AAPL); Seymour owns (BHP); Seymour owns (F); Seymour owns (INTC); Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (IJR); Finerman's Firm Is Short (MDY); Finerman's Firm Is Long S&P 500 Puts; Finerman's Firm Is Long Russell 2000 Puts; Finerman's Firm And Finerman Own (AAPL); Finerman's Firm And Finerman Own (BP); Finerman Owns (C); Finerman's Firm And Finerman Own (CVS); Finerman's Firm Owns (HPQ); Finerman's Firm Owns (JPM) Leap, (JPM); Finerman Owns (JPM); Finerman's Firm And Finerman Own (MSFT); Finerman's Firm Owns (TGT); Finerman Owns (USO); Finerman's Firm Owns (WMT); Terranova Owns (JPM); Terranova Owns (V); Terranova Owns (BX); Terranova Owns (GS); Terranova Owns (UPL); Terranova Owns (AKAM); Terranova Owns (XOM); Terranova Owns (BAX); Terranova Owns (TCK); Terranova Owns (HOC); Terranova Owns (VRTS); Pete Najarian owns (PFE). Pete Najarian owns (TCK). Pete Najarian owns (AAPL). Pete Najarian owns (AKAM). Pete Najarian owns (C). Pete Najarian owns (HK). Pete Najarian owns (HPQ). Pete Najarian owns (TEVA). Pete Najarian owns (MS). Pete Najarian owns (RSX). Pete Najarian owns (GE). Pete Najarian is long (RIMM) calls. Pete Najarian is long (AVL) calls. Pete Najarian is long (EWZ) calls. Pete Najarian is long (HUN) calls. Pete Najarian is long (ICO) calls. Pete Najarian is long (MYL) calls. Pete Najarian is long (NTAP) calls. Pete Najarian is long (XLF) calls. Pete Najarian is long (PMCS) calls. Pete Najarian is long (BIG) calls. Pete Najarian is long (CVS) calls. Pete Najarian is long (XL) calls. Pete Najarian is long (WFT) calls. Pete Najarian is long (JOYG) calls. Pete Najarian is long (MYL) calls. Pete Najarian is long (AXL) calls. Pete Najarian is long (BSX) calls. Pete Najarian is long (HBC) calls. Pete Najarian is long (STI) calls. Pete Najarian is long (TYC) calls. Steve Grasso owns (BA), (C), (CSCO), (PFE), (JPM), (BAC), (AMD), (ASTM), (LPX), (PRST), (D), (LIT), nasdaq and (XMHYX).
For Patty Edwards
Edwards is long (BMY) for clients
Edwards is long (TEVA) for clients
Edwards is long (AAPL) for clients
Edwards is long (TGT) for clients
Edwards is long S&P 500 for clients
Edwards is long nasdaq 100 for clients
Edwards is long gold for clients
Edwards is long silver for clients
Edwards is long (PGM) for clients
Edwards is long (ORCL) for clients
Edwards is long (AKAM) for clients
Edwards is long (BMO) for clients
Edwards is long (MSFT) for clients
For Steve Grasso
Stuart Frankel & Co and its partners own (AMD)
Stuart Frankel & Co and its partners own (AOL)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (MSFT)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
For Brian Kelly
Accounts Managed by Kanundrum Capital are long (EBAY)
Accounts Managed by Kanundrum Capital are long (VLO)
Accounts Managed by Kanundrum Capital are long (TBT)
Accounts Managed by Kanundrum Capital are long (DBA)
Accounts Managed by Kanundrum Capital are long (GLD)
Accounts Managed by Kanundrum Capital are long (SLV)
Accounts Managed by Kanundrum Capital are long (TSN)
Accounts Managed by Kanundrum Capital are long (CLF) puts
Accounts Managed by Kanundrum Capital are long (SPY) puts
Accounts Managed by Kanundrum Capital are long VIX calls
Accounts Managed by Kanundrum Capital are long wheat futures
Accounts Managed by Kanundrum Capital are long soybean futures
Accounts Managed by Kanundrum Capital are long natural gas futures
Accounts Managed by Kanundrum Capital are long gold futures
Accounts Managed by Kanundrum Capital are long silver futures
Accounts Managed by Kanundrum Capital are short (XLF)
Accounts Managed by Kanundrum Capital are short (SMH)
Accounts Managed by Kanundrum Capital are short bond futures
For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & IRL PLC
For Whitney Tilson
Funds Managed By Whitney Tilson Own (BRK.A)
Funds Managed By Whitney Tilson Own (BRK.B)
Funds Managed By Whitney Tilson Own (JCP)
Funds Managed By Whitney Tilson Own (STX)
For Mike Khouw
Cantor Fitzgerald is a market maker in (TYC)
For Colin Gillis
**No Disclosures
For Joe LaVorgna
**No Disclosures
SOT 3/28/11 Tim Seymour Halliburton
**No Disclosures
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