Why Focus On The Financials?
Financial stocks are rallying,
working to lift the broad
market. With the next interest rate cut from the Federal Reserve just around the
corner, the market is looking at the prospect of better returns for the
financial institutions which prosper in a declining interest rate environment.
The most reliable indicator of the Fed’s likely action in
the days before an FOMC meeting is the Federal Funds futures contract. A
25-basis-point cut is fully priced in and a 50-basis-point cut is not out of the
question. The market remains uncertain about the bigger cut, however, with the
July contract
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move.
Still, the expectation is for the Fed to continue easing
rates through the summer: the August contract
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of a 50-point cut by the August 21 meeting. For information on how to make these
easy and useful calculations yourself, see Loren Fleckenstein’s article on the
subject in the Stocks-Education section of TradingMarkets.com.
Financial institutions generate more business when
interest rates are low. American Express
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Morgan
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The Dow is up 91 at 10,738, the Nasdaq is up 36.12 at
2067.08, and the S&P 500 is up 14.60 at 1237.69.
But another reason you should focus on the financials is
the high number of stocks that are top price and earnings performers that are
also trading at new highs. Check out the Top
RS/Earnings New Highs List and you find financials dominating the list. Some
of the names that are breaking out to new highs today include CORUS Bankshares
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Alliance Bancorp
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Kevin Haggerty also has seven financials targeted in his Views
From The Trading Desk this morning.
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wider-than-average bars.
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In the sectors, networkers
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negative territory and are now the sessions strongest area, up 3.6%. Securities
broker/dealers
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earnings expectations despite a 36% drop in profit. On the downside
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are off sharply — down 4.6% — after Wednesday’s tumble in wholesale
gasoline prices. Energy producers have been benefiting from record high refining
margins and will be less profitable now that the gasoline and distillates prices
have fallen.