Is the Bottom in for Banks?
In the wake of relatively strong results from Morgan Stanley and Bank of America, is it safe to say financials have put in a bottom?
Bank bulls seem to have every reason to run.
Although Morgan Stanley posted an expected loss, results were better than expected. And notably, their trading business was particularly strong on both a year-over-year and quarterly basis. In the same period rival Goldman Sachs reported weaker trading results.
Meanwhile, Bank of America also beat the Street with CEO Bryan Moynihan saying the mortgage business had reached a bottom and was ready for an upturn.
Considering BofA and Morgan Stanley have generated so much skepticism, do their better than expected results signal the worst is over?
“Probably not,” says trader Guy Adami. “I don’t think the bottom is in. However he says if you’re a trader, there’s probably a short-term play on the long side, but with tight stops.”
Stephanie Link doesn’t seem to like these banks, even as a trade. “I think both banks still have issues,” she says. “Morgan’s returns were depressed and loan growth fell at BofA.” Neither of those developments are bullish.
Trader Simon Baker largely agrees. “There are a whole lot of headwinds for banks,” he says, such as financial regulation and renewed issues in Europe.
If you’re a long-term investor, Mike Murphy says stay away. “There are better places to put money to work.” However if you’re a trader, he says, “I think you can look at BofA around $9 with a stop around $8.”
If you’re a long-term investor and you must be in banks, trader Guy Adami adds the best play is USB . “Even at current levels, that’s the buy.”
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Trader disclosure: On Apr 19, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long IBM; Stephanie Link is long FCX; Stephanie Link is long IBM; Simon Baker’s firm owns AAPL; Simon Baker’s firm owns BAC; Simon Baker’s firm owns GS; Simon Baker’s firm owns JPM; Simon Baker’s firm owns GDX; Simon Baker’s firm owns MS; Simon Baker’s firm owns NFLX; Simon Baker’s firm owns GLD; Simon Baker’s firm owns XLF; Simon Baker’s firm owns IBM; Simon Baker’s firm owns WMT; Simon Baker’s firm owns JOYG; Simon Baker’s firm owns ADSK; Simon Baker’s firm owns DELL; Simon Baker’s firm owns IBM; Simon Baker’s firm owns MSFT; Simon Baker’s firm owns KEY; Simon Baker’s firm owns QCOM
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