By Alan Valdes
Another day, another intraday all-time high. For most Americans, summer started with the Labor Day weekend. But for traders on Wall Street, the summer season always begins with the 2Q jobs report and—just as (if not more) important—summer earnings season.
That season started with Alcoa on Monday, which saw a beat on both its top and bottom lines. But unfortunately for Alcoa, the stock has been stuck in a $10 trading range for many years. Its numbers did not move markets.
Wednesday, traders took a breather with market volume extremely weak. Today, it’s back to risk on. The $3 trillion the markets made back since the British vote is back to work. Traders have watched the Dow Industrials (^DJI) gain over 1,200 points since Brexit, and those sitting on the side line are now jumping back in.
JPMorgan (JPM) started the day with much better-than-expected numbers. Tomorrow could set the tone for the remainder of the summer. We get Citi (C), Wells Fargo (WFC), PNC and US Bancorp. If these four beat (except for some profit taking), it will be hard to stop this rally.
Why? Well, if you look at the numbers from JPM, it did better in loans and credit card business, plus it had a 10% jump in its consumer deposit business. Traditionally, loans and credit card business tend to do better from August to December (back-to-school shopping, home furnishings and renovation, holiday sales, etc.) than from April to June. So we could see a sustained rally for the remainder of the summer. Right now—today—my clients are back to buying. RISK ON for today.
Next week, banks will be in the rear-view mirror, as traders start to focus on the techs (XLK). Techs, which have be lagging, got a boost this week from Pokémon and the Line IPO, both adding millions of dollars to the companies’ bottom lines as well as lining their investors’ pockets. Apple (AAPL), which has fallen out of favor with investors, and Microsoft (MSFT), which looks to post solid numbers, have a lot riding on this quarter. If they surprise to the upside, expect to see funds getting back into this sector.