BAC - Bank of America Corporation

NYSE - NYSE Delayed Price. Currency in USD
29.59
-0.23 (-0.77%)
At close: 4:00PM EDT
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Previous Close29.82
Open29.97
Bid29.63 x 39400
Ask29.67 x 1000
Day's Range29.57 - 30.13
52 Week Range22.66 - 31.20
Volume167,359,784
Avg. Volume55,982,492
Market Cap275.433B
Beta (3Y Monthly)1.64
PE Ratio (TTM)10.53
EPS (TTM)2.81
Earnings DateOct 16, 2019
Forward Dividend & Yield0.72 (2.41%)
Ex-Dividend Date2019-09-05
1y Target Est33.19
Trade prices are not sourced from all markets
  • Bank of America Stock Could Rally Into Year End
    Investopedia

    Bank of America Stock Could Rally Into Year End

    Bank of America stock looks set to gain ground into year end, despite multiple bank industry headwinds.

  • State Street (STT) Hikes Dividend by 11% to Cheer Investors
    Zacks

    State Street (STT) Hikes Dividend by 11% to Cheer Investors

    State Street's (STT) dividend hike announcement is part of its 2019 capital plan. The approval of the plan by the Federal Reserve reflects the company's strong balance sheet position.

  • BofA (BAC) Under CFPB Investigation for Unauthorized Accounts
    Zacks

    BofA (BAC) Under CFPB Investigation for Unauthorized Accounts

    The CFPB is investigating Bank of America (BAC) to find if it opened unauthorized customer accounts back in 2014.

  • Bank Stock Roundup: Fed Cuts Rate, JPMorgan, U.S. Bancorp & Wells Fargo in Focus
    Zacks

    Bank Stock Roundup: Fed Cuts Rate, JPMorgan, U.S. Bancorp & Wells Fargo in Focus

    Federal Reserve's second rate cut this year likely to impact banks' net interest margin.

  • Prolonged Funding Stress Boosts Calls for Permanent Fed Fix
    Bloomberg

    Prolonged Funding Stress Boosts Calls for Permanent Fed Fix

    (Bloomberg) -- Signs that stress in U.S. funding markets is rebuilding ramped up pressure on the Federal Reserve to permanently increase reserves by boosting Treasury holdings, even as it was preparing a temporary liquidity injection for a fourth straight day.The New York Fed plans to do another $75 billion overnight repo operation on Friday. It follows liquidity doses of the same size Thursday and Wednesday, and $53.2 billion on Tuesday. The central bank is deploying this remedy for the first time in a decade.The Repo Market’s a Mess. (What’s the Repo Market?)This week’s actions have helped calm the funding market, with repo rates declining to more normal levels after soaring to 10% Tuesday, four times last week’s levels. However, swap spreads tumbled to record lows Thursday amid concern Fed policy makers haven’t announced more aggressive steps. Swaps are signaling less appetite for Treasuries, driven by concern traders won’t be able to fund purchases through the repo market.“The Fed needs to do at least double what they offered now and maybe even be more vigilant and do something even more significant,” said Thomas Simons, senior economist at Jefferies LLC. “This attitude of trying to kind-of fix the problem is not great.”There are others signs of investor apprehension about future funding levels, which is manifesting in different ways.Treasury bill sales on Thursday were met with a poor reception, as investors demanded to be compensated via higher yields for locking up cash. Meanwhile, in cross currency basis -- which show floating-rate payments in different currencies -- the premium for the Australian dollar over its U.S. counterpart collapsed by the most in eight years during Asian trading hours.So while overnight general collateral repurchase agreement rates have retreated, trading around 1.95% Friday, around Thursday’s levels, market participants say the Fed needs to reveal a permanent fix, rather than these ad-hoc overnight operations.“We expect these episodes of funding stresses to become more frequent with demand for funding and U.S. Treasury supply forecast to increase heading into year-end and the Fed’s reserve levels likely to drop further,” Jerome Schneider, head of short-term bond portfolios at Pacific Investment Management Co., wrote in a note Wednesday with his colleagues.The operations, once common before the 2008 financial crisis, temporarily add cash as the Fed takes government securities as collateral. Wall Street bond dealers submitted about $84 billion of securities for Thursday’s Fed action, the most in the three days.The latest addition of liquidity follows the Federal Open Market Committee’s move Wednesday to reduce the interest rate on excess reserves, or IOER, by more than their main interest rate, an attempt to quell money-market stresses.Given the added supply, banks’ holdings of Treasuries have risen and are increasingly being financed by money-market funds investing in repo, which leaves “U.S. funding markets more fragile,” Schneider wrote. He said this adds to other reasons why the Fed needs to do more to engineer a long-term fix.Cap BustedAfter policy makers wrapped up the two-day meeting Wednesday, Fed Chairman Jerome Powell said the central bank will keep doing these repo operations if that’s what it takes to get markets back on track. He spoke hours after the effective fed funds rate busted through the central bank’s cap.Powell also said the Fed would provide a sufficient supply of bank reserves so that frequent operations like the ones they’ve done this week aren’t required.The only way “to permanently alleviate the funding stress is to rebuild the buffer of reserves in the system,“ according to Morgan Stanley strategist Matthew Hornbach.Relying on repo operations doesn’t resolve the issue of reserves declining as the Treasury rebuilds balances, Hornbach wrote in a note. Having regular operations will also increase market uncertainty as the Fed could halt purchases at any time, while the size of its buying will have to expand over time as reserves drop, he said.“It is certainly possible that we’ll need to resume the organic growth of the balance sheet sooner than we thought,” Powell said, referring to the central bank potentially buying securities again to permanently increase reserves and ensure liquidity in the banking sector.Read: Fed Should Be Worried About ‘Collateral Damage,’ BofA SaysMany strategists had predicted the Fed would take even more aggressive measures to reduce the pressures. One idea that’s gotten a fair amount of attention is something called a standing fixed-rate repo facility -- a permanent way to ease funding pressures. Many analysts even predicted a Wednesday announcement that the Fed would start expanding its balance sheet.That didn’t happen. However, with the Fed apparently ready to keep injecting liquidity whenever it’s needed, “it’s enough for now,” said Jon Hill of BMO Capital Markets.“This week’s dramatic moves in the short-term funding markets serve as a case in point for the need to carefully consider liquidity in the financial system,” Rick Rieder, global chief investment officer of fixed income at BlackRock Inc., wrote in a note.“All of this funding market gyration points to the increasingly obvious fact that the end of Fed reserve draining is insufficient to stabilize these markets,” he said.(Updates with Friday repo levels.)\--With assistance from Edward Bolingbroke and Stephen Spratt.To contact the reporters on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net;Alexandra Harris in New York at aharris48@bloomberg.netTo contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • How to Trade Bank of America Stock as It Approaches Resistance
    InvestorPlace

    How to Trade Bank of America Stock as It Approaches Resistance

    Bank of America (NYSE:BAC) stock has been benefiting from a huge rebound in bank stocks. BAC stock is up 15% over the past few weeks, while JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS) and others are also riding higher.Source: Andriy Blokhin / Shutterstock.com However, many of these names are running into potential resistance -- including Bank of America stock.That makes it a much harder buy than it was a few weeks ago, when it was sitting near support. Of course, it isn't just sentiment and broad-market action that's moving the banks. The banks are widely impacted by the gyrations in interest rates and how much money they can make as a result.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 8 Dividend Stocks to Buy for a Recession Over the last few weeks, various spreads between long- and short-dated bonds were widening, which aids in the banks' profitability. Therefore, BAC stock and others were on the move higher. Previously, tightening in these spreads -- such as the widely watched 10-year/2-year spread -- caused a brutal decline in many of these stocks.Up big so far this month, is BAC stock worth buying now? Trading BAC StockHopefully InvestorPlace readers are sitting on big gains in BAC stock. We flagged this name a few weeks ago as it sat on range support, and the rally from that point has been impressive. Now though, shares have gone from range support to range resistance. Click to EnlargeIn late July, BAC stock was on the cusp of a major breakout. Shares were consolidating between $30 and $30.50 and looked set to make a significant move higher. This followed solid earnings and a recent increase in capital returns.But then all the yield-curve worries came about, as bond prices surged and spreads collapsed. This was a jarring couple of days for the stock market in general and extra tough on the bank stocks.As you can see on the chart, Bank of America stock has been consolidating between $29.50 and $30, as traders eye BofA for a potential move into range resistance.From a trading perspective, getting the bounce from around $26.50 to $30+ is really all we need in order to justify exiting the position. For new longs or those looking for more upside though, this consolidation period is 100% necessary for a breakout to even be possible.Without it, BAC stock price would surely be rejected from the $30.50 to $30.80 area.Given the amount of false breakouts we've had in BAC stock, I eventually want to see a close above $31. That puts the 52-week high of $31.37 on the table and above that, a further rally can ensue.If BAC stock need more time and/or is rejected from range resistance, let's see if either the 20-day or 50-day moving average can support the stock. Below the 200-day and another test of range support is possible. Valuing Bank of America StockThe thing about the banks? They're quite cheap.Bank of America stock trades at roughly 10.5 times this year's earnings expectations. The bank is expected to post modest earnings growth this year and next year, with 8% growth in 2019 and 6.7% growth in 2020.Revenue is a different story though, with expectations within 10 basis points of flat for both this year and next year. Essentially, analysts predict that BAC will generate roughly the same amount of revenue in 2020 that it did in 2018. Not impressive.Some may argue that they like JPM and Citigroup more than BAC. After all, both have better yields, better revenue growth, better earnings growth this year and in the case of Citigroup, a lower valuation. Not that JPM's 11.6 times earnings should be considered expensive.And while that statement may look like a negative for BAC stock, it's not intended to. The three stocks all have low valuations and solid earnings growth projections. Further, BofA was approved for a buyback up to $30.9 billion and a 20% increase in its dividend. Shares now yield 2.4%, which is respectable in a low-rate environment, although less than the 3% and 2.9% investors can still get in JPM and C, respectively.At the end of the day, most of this group moves in tandem. If BAC is breaking out, it's likely C and JPM have the wind in their sails too. Keep this group on your radar, looking for a pullback or a breakout opportunity.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long BAC and C. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 Dividend Stocks to Buy for a Recession * 10 Companies Making Their CEOs Rich * The 7 Best S&P 500 Stocks of 2019 So Far The post How to Trade Bank of America Stock as It Approaches Resistance appeared first on InvestorPlace.

  • Financial Times

    New York Fed examines banks’ role in money market turmoil

    John Williams, president of the New York Fed, on Friday questioned the hesitance of the banks in an interview with the FT. “The thing we need to be focused on today is not so much the level of reserves [held at the Fed],” he said.

  • Investopedia’s 2019 Best Robo-Advisor Awards
    Investopedia

    Investopedia’s 2019 Best Robo-Advisor Awards

    Investopedia ranks the best robo-advisors, using the most detailed evaluation process in the industry, to help you find the right one for you.

  • Should Long-Term Investors Buy Bank of America Stock After the Rate Cut?
    InvestorPlace

    Should Long-Term Investors Buy Bank of America Stock After the Rate Cut?

    On Sept 18, the Federal Reserve cut interest rates by 25 basis. The expected move came amid concerns about trade wars and a potential economic slow down globally. Yet Fed officials were divided about the decision -- as well as over the need for any future cuts. Variables such as interest rates, economic growth, global political and trade worries and activity in the housing markets can impact a bank's stock price. Therefore, today I'd like to discuss the outlook for Bank of America (NYSE:BAC), one of the largest banks globally, and BAC stock.Source: Michael Vi / Shutterstock.com Right after the interest rate announcement, there was increased volatility in the equity markets. Initially, broader indices fell after the decision. Toward the close of trading, stocks rebounded. The recovery was led by banks and the big tech. Although I like BAC stock for a long-term diversified portfolio, I expect market volatility to continue for several more trading sessions.In case of further pullbacks in BAC stock in the coming days, investors may consider buying into Bank of America shares on the dip. Here's why.InvestorPlace - Stock Market News, Stock Advice & Trading Tips BAC Stock and the EconomyThe outlook given by Bank of America as well as CEOs of other major corporations in recent months shows that the economic or banking cycle in the U.S. isn't at its most attractive point. Our economy had fired on almost all cylinders for a number of years. Now it may be poised to glide onto a slower growth trajectory. * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars Bank stocks are exposed to economic ebb and flow. If you are considering buying banking stocks, it'd be important to remember that two main factors affect a bank's revenue and earnings: * Interest rates: As interest rates increase, a bank can earn more money from its loan portfolio. * Economic activity outlook: In a robust economy, more money circulates through the system, fueling a bank's non-interest income.In short, if the U.S. economy cools down in the coming months, Bank of America stock is likely to be adversely affected. Despite the potential economic headwinds, it is not quite possible to know if or when we will enter a recession in the coming quarters. Interest Rates and Bank of America StockBank of America stock's income is divided into two main categories: net interest income (NII) and non-interest income.Like other banks, BAC stock earns income on loans and other interest-earning assets. It pays interest on deposits and other interest-bearing liabilities. We can arrive at the bank's net interest income by deducting interest paid from the total interest earned.In general, decreasing interest rates mean headwind for banks including Bank of America as lower interest rates put pressure on NII and margins.The low interest rate environment in the U.S. has indeed had negative impact on BAC stock's net interest income. On July 17, Bank of America released Q2 earnings. Although the bank still expects to see growth in the face of expected interest rate cuts and slower economy, management lowered its full-year guidance of NII.During the conference call, Chief Financial Officer Mr. Donofrio cut 2019 NII growth outlook to 2%, assuming interest rates stayed stable. He said that if the Fed were to cut interest rates twice in 2019, then the BAC's NII growth would be about 1%.Several of our readers may well remember that earlier in April, Bank of America had already cut its NII growth outlook to 3% in a stable interest rate environment. Since the release of Q2 earnings in July, we have had two Fed rate cuts, one in late July and one this week.At present, Fed's rate-hike cycle is over. However, we do not know if the central bank may cut rates further. One can even argue that we have some ambiguity over future Fed rate decisions. In other words, later in the year, if there is another rate cut, then BAC stock's earnings from loans could even suffer further. BAC Stock Has Attractive Valuation LevelsIn the U.S., the Bank of America serves about 66 million consumers and small business clients, giving the bank an attractive deposit base. It has over 4,350 retail financial centers and plans to increase that number in the coming quarters. The group's online and mobile banking operations are also growing fast, adding to increased fees charged for banking activities.Due to extensive expense-management measures over the past several years, Bank of America's efficiency ratio has improved (i.e., gone down). It now stands at 57.48%.A decrease in the ratio means that the bank has incurred lower costs to generate every dollar of income. For banks, the objective is to get the efficiency ratio as close to 50% as possible. This respectable overall number by BAC shows how effective management's cost-cutting initiatives have been.The efficiency ratio is calculated by dividing the BAC's non-interest expenses by its net revenue. Non-interest expenses may include personnel salaries and other related expenses, marketing costs, and real estate rent, etc.Furthermore, the trailing P/E ratio for BAC stock stands at an attractive 10.7. And value investors may be interested to know that its price-to-book (P/B) ratio is 1.14.P/B ratio is used widely to value for asset-heavy companies, such as banks or other financial institutions. In general, for banking stocks, a number below 2 could imply good long-term value. However, investors should due further due diligence by looking at other metrics, too. Where BAC Stock Price Is NowYear-to-date, Bank of America stock is up over 21%. However, over the past several months, BAC stock has been trading in a range, between about $26 and $31.BAC stock's 52-week range has been $31.37 (Sep. 21, 2018) and $22.66 (Dec. 24, 2018). In other words, we are at the anniversary of last year's highest level.The share price is now hovering around $30, where there is substantial resistance from a technical point of view. If Bank of America stock cannot go and stay over the 52-week high of $31.37 soon, there will likely be profit taking in the stock. Then, I'd expect the stock to fall toward $27.50 level, where it will find initial support.I would not advocate bottom-picking in case of near-term price weakness. Yet, I find Bank of America stock to be a buy candidate if the price declines toward $27.50 or even lower. If BAC shares can build up momentum, then investors are likely to push to price to a new high in the last quarter of the year. By the end of 2020, long-term investors may indeed see the price reach $34-$35.Meanwhile, BAC shareholders can also enjoy a dividend yield of about 2.4%. In Q2, the bank paid a dividend of 18 cents per share, representing a 20% increase over the prior-year quarter. Management also continues to buy back shares, which supports Bank of America stock price. * 8 Dividend Stocks to Buy for a Recession The Bottom Line on BAC StockIn the coming weeks, BAC stock, like many other stocks in the broader market, is likely to be impacted by the rhetoric of the U.S.-China trade wars as well as global growth worries. Therefore, I expect further volatility in the share price, especially until the next earnings expected to be released on Oct. 21. However, long-term investors may consider buying the dips in BAC shares.As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 Dividend Stocks to Buy for a Recession * 10 Companies Making Their CEOs Rich * The 7 Best S&P 500 Stocks of 2019 So Far The post Should Long-Term Investors Buy Bank of America Stock After the Rate Cut? appeared first on InvestorPlace.

  • Fed Cuts Rate, Bank Stocks Rally on Divided Future Course
    Zacks

    Fed Cuts Rate, Bank Stocks Rally on Divided Future Course

    The Fed seeks to remain focused on analyzing incoming economic data to determine future moves. Heathy domestic economy and several streamlining efforts are likely continue supporting bank stocks.

  • Business Wire

    Employers Offering Financial Wellness Programs Double in Recent Years

    Bank of America today announced findings from its annual 2019 Workplace Benefits Report, which reveals that more than twice as many companies are offering workplace financial wellness programs to employees today compared to four years ago (53 percent today versus 24 percent in 2015). Now in its ninth edition, this report tracks the importance of benefit programs and uncovers an expanded set of opportunities for employers to improve their employees’ financial wellness. Majority of employees feel financially well: 55 percent of employees today rate their own financial wellness as good or excellent, down from 61 percent a year ago.

  • Barrons.com

    Health Savings Accounts Are a Misunderstood Retirement Savings Tool. Here’s How to Use Them.

    American workers in high-deductible health plans are embracing health savings accounts, a new survey shows, but their value as a potential retirement-savings vehicle is still largely untapped and not understood.

  • Moody's

    Moody's Fully Supported Municipal & IRB Deals

    Announcement: Moody's Fully Supported Municipal& IRB Deals. Global Credit Research- 18 Sep 2019. New York, September 18, 2019-- ASSIGNMENTS:.

  • Bank of America Burns Savers, But Investors May Like BAC Stock
    InvestorPlace

    Bank of America Burns Savers, But Investors May Like BAC Stock

    Shares of Bank of America (NYSE:BAC) are up 22% year-to-date, putting the stock ahead of the Financial Select Sector SPDR (NYSEARCA:XLF), the largest financial services exchange-traded fund, by about 220 basis points.Source: Andriy Blokhin / Shutterstock.com Impressively, Bank of America stocks is up nearly 11% this month. Prior to today's Federal Reserve rate cut announcement, an array of banks, including BAC, warned about the impact of lower interest rates on net interest margins during their second-quarter earnings calls. In fact, that issue was one of the primary takeaways from banks' most recent round of of earnings updates.Bank of America rivals, such as JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC), are already complaining that lower interest rates are weighing on earnings. All that simply because of a mere eight-basis point squeeze (on average) in net interest margins.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAs is the case with its competitors, lower rates are a real consideration with Bank of America. And they likely explain why analysts have recently grown bearish on the name. On Aug. 29, Raymond James lowered its rating on Bank of America stock to "market perform" from "outperform." A week later, Keefe, Bruyette & Woods did the same thing, while slashing its price target on BAC stock to $29 from $36. The shares closed just under $30 on Sept. 17."… in a falling rate environment where the yield curve remains inverted, we believe that creates an environment where it will be difficult for shares to outperform and a Market Perform is appropriate," said KBW's Brian Kleinhanzl. Dueling Views On BAC StockOther headwinds for Bank of America stock include speculation that the economy is slowing and the lingering U.S.-China trade war. Those two issues are joined at the hip. If the U.S. and China cannot come to terms on trade, both economies will suffer. If the U.S. economy languishes, lending will contract, putting further strain on the financial services sector.Additionally, the Fed is said to be "data dependent." This means that economic reports revealing a slowing economy, will prompt the central bank to step in, likely with lower interest rates. This would further suppress interest margins for money center banks. * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars One area of good news is that, in recent weeks, President Donald Trump appeared eager to work with China on trade, even implying that a resolution could be realized over the near term.Another factor, albeit wider-ranging in nature, is the recent rotation out of growth stocks into value names. BAC stock is a value play. The S&P 500's Value Index allocates 21.8% of its weight to financial stocks, about 550 basis points more than the benchmark's second-largest sector allocation.At 9.9 times forward earnings and 1.1 times book value, BAC stocks fits the bill as a value name -- and one that could benefit from a lengthy growth-to-value rotation. The Bottom Line on Bank of America StockThe Fed has set the stage for banks to boost buybacks and dividends. Yielding just 2.4%, Bank of America stock has ample room for dividend growth.Additionally, BAC has enviable market positions across an array of pivotal financial services and products. According to Morningstar, Bank of America is racking up accolades in investment banking, credit cards and several other financial services.That gets investors to a compelling long-term story with short-term macro issues with Bank of America stock.As of this writing, Todd Shriber owns shares of XLF. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 CBD Stocks to Buy That Are Still Worth Your Investment Dollars * 5 Stocks to Buy With Great Charts * 5 Goldman Sachs Stocks to Buy with Over 20% Upside Potential The post Bank of America Burns Savers, But Investors May Like BAC Stock appeared first on InvestorPlace.

  • Bank of America taking 60,000 square feet in new Polaris mixed-use development
    American City Business Journals

    Bank of America taking 60,000 square feet in new Polaris mixed-use development

    A new mixed-use development is getting started near Polaris Fashion Place, and it'll be anchored by a major banking player that's ramping up its Central Ohio presence. A joint venture of VanTrust Real Estate and NP Ltd. is breaking ground on a second phase for the Pointe at Polaris project along Lyra Drive. This project will include a 145,000-square-foot office building and a 260-unit apartment project.

  • Federal regulators reveal investigation of Bank of America for possible unauthorized accounts
    American City Business Journals

    Federal regulators reveal investigation of Bank of America for possible unauthorized accounts

    Charlotte-based Bank of America Corp. is under investigation to determine whether it opened unauthorized customer accounts, according to information released on Tuesday by the Consumer Financial Protection Bureau.

  • CFPB investigating whether Bank of America opened accounts without customer consent
    American City Business Journals

    CFPB investigating whether Bank of America opened accounts without customer consent

    In documents posted on its website Tuesday, the watchdog agency said it has sought information from the bank concerning account openings going back to March 2014.

  • Is JPMorgan Stock Worth Holding on to Post Dividend Hike?
    Zacks

    Is JPMorgan Stock Worth Holding on to Post Dividend Hike?

    As part of its 2019 capital plan, JPMorgan (JPM) announces a 12.5% dividend hike. One should take a look at its fundamentals and prospects before taking any investment decision.

  • One banking giant overtakes another in St. Louis deposits
    American City Business Journals

    One banking giant overtakes another in St. Louis deposits

    Bank of America has passed U.S. Bank as the St. Louis retail market leader in deposits. Bank of America had $12.61 billion in deposits in St. Louis as of June 30, a 14.09% market share, edging ahead of U.S. Bank's $12.48 billion, a 13.96% share, according to the latest Federal Deposit Insurance Corp. (FDIC) report.

  • Bank of America (BAC) Stock Sinks As Market Gains: What You Should Know
    Zacks

    Bank of America (BAC) Stock Sinks As Market Gains: What You Should Know

    In the latest trading session, Bank of America (BAC) closed at $29.94, marking a -0.63% move from the previous day.

  • Markets Have Three Wishes. Only One May Come True.
    Bloomberg

    Markets Have Three Wishes. Only One May Come True.

    (Bloomberg Opinion) -- There’s still plenty of time for things to go off the rails, but 2019 is shaping up to be one of those rare years when the global stock, bond, commodities and foreign-exchange markets are all poised to deliver positive returns. The last time that happened was in 2010. Investors say three things would keep the good times rolling; unfortunately, two of those items are unlikely to happen, starting with the Federal Reserve’s monetary policy decision on Wednesday.The latest monthly survey of global fund managers by Bank of America Merrill Lynch found that German fiscal stimulus, a 50-basis-point rate cut by the Fed and Chinese infrastructure spending would be the most bullish policies for risk assets over the next six months. But the famously austere Germans look hesitant to fend off a slowdown in Europe’s largest economy just by spending. Finance Minister Olaf Scholz said last week that Germany would stick to a balanced budget, but was ready to act in moments of crisis. As for the Fed, the odds that policy makers on Wednesday will announce a half-point cut in their target rate for overnight loans between banks instead of a quarter-point reduction has shrunk to less than 15% from more than 40% last month. This follows a string of data showing that, thanks to the consumer, the U.S. economy is holding up pretty well amidst the ongoing trade war with China. There are even some economists and strategists, such as those at Brown Brothers Harriman, who say the Fed maybe doesn’t need to lower rates at all this time. The most likely scenario is that the central bank will ease monetary policy on Wednesday, while saying any further loosening will depend on the data, which is something that isn’t exactly priced into markets. “There is a risk that absent a strong signal that the Fed is clearly at the beginning of a sustained easing cycle, we could see some disappointment,” BNY Mellon strategist John Velis wrote in a research note Tuesday.So if the Germans and the Fed disappoint, that leaves the heavy lifting to China. Here, though, there is some good news. Bloomberg News reported last month that China is considering allowing provincial governments to issue more bonds for infrastructure investment. Policy makers may raise the annual quota for so-called special bonds from the current level of 2.15 trillion yuan ($305 billion), Bloomberg News reported, citing people familiar with the situation who asked not to be named as the matter wasn’t yet public.OIL MARKETS HAVE A DEEP THROATOne day after soaring almost 15% following an attack that wiped out about half of Saudi Arabia’s output capacity, oil plunged as much as 7% as Reuters reported the kingdom’s output will be fully back on line in the next two to three weeks, which is much sooner than the months some expected it would take. No matter that Reuters cited one unidentified Saudi source who was briefed on the timeline – traders wanted to believe. It helped that Saudi officials later confirmed that at least one of the damaged facilities will be back to producing oil at pre-attack levels by the end of the month. However, oil traders might be wise to be a bit more skeptical. It’s not crazy to think that Saudi officials would want to downplay the success of the strikes at a time when its military is getting a lot of criticism for not detecting and stopping whatever it was that crippled the facilities. “We flip from worst case scenario to best case scenario in less than 24 hours,” John Kilduff, a partner at Again Capital LLC, told Bloomberg News. “We still need damage assessments and what it takes for those repairs.”CAN’T SPELL FUNDING WITHOUT ‘FUN’The repurchase, or repo, market went haywire for a second straight day on Tuesday, forcing the Fed to inject billions of dollars of cash into the system for the first time in a decade to temper a surge in short-term rates. All of this sounds concerning, especially since the financial crisis was partly exacerbated by a seizing up of the funding market. But that’s not what’s happening here. Market participants say the spike in short-term rates is a result mainly of a confluence of technical events, including the sudden withdrawal of cash from money-market funds by companies needing to pay taxes. But there are still reasons to be concerned. The first is that this all comes with the new York Fed still without a formal head of its markets group following the abrupt departure of  the widely respected Simon Potter earlier this year. The implication is that if Potter were still around, traders at the central bank might have been better prepared to handle any unforeseen stresses in funding markets. The second reason for concern is that the move in the repo market has definitely had some knock-on effects, especially in overnight bank funding costs. Those reached 45 basis points Monday before easing to 41.9 basis points Tuesday, levels that are more in line with times of broad market turbulence. Bank earnings are already under pressure from a flat yield curve, and this spike in funding cost won’t help, which may explain why the KBW Bank Index fell the most in more than two weeks on Tuesday.SHAKING THE BEARS OUTTo say it hasn’t been a good month for the U.S. Treasury market would be an understatement. The Bloomberg Barclays U.S. Treasury Index was down 1.96% in September through Monday, putting the benchmark on track for its worst monthly performance since it dropped 2.67% in November 2016 following President Donald Trump’s election victory. The swift decline has many wondering whether the bond market is at the beginning of a sustained turn for the worse. The evidence, though, suggests the move has been more about positioning than anything fundamental. That is seen in the Bank of America survey. For the second straight month, it found that being “long” Treasuries was the most crowded trade in global markets, followed by being “long” technology and growth stocks and being “long” gold. So, with so many investors and traders leaning one way, it doesn’t take much for a move in the opposite direction to force traders to rebalance. On the positive side, JPMorgan Chase & Co.’s widely followed weekly survey of bond traders released on Tuesday suggested that the sell-off may be ending. Its index tracking clients who are “short” is back near its lowest level since 2016, suggesting all those who want to bet against the bond market have already done so.EARNINGS DON’T MATTERThe latest Bloomberg News survey of where Wall Street strategists expect the S&P 500 to end the year came out on Tuesday, and the results confirm just how reliant equities are on low interest rates. It’s not so much that strategists see the S&P 500 ending the year at 3,000, or little changed from current levels; it’s that they expect equities to be resilient in the face of ever lower profit forecasts. They now forecast 2019 earnings per share of $166.35 for the gauge, down from their estimate of $172.25 at the start of the year. Also back then, the strategists we’re only expecting the S&P 500 to end the year at 2,913. So they’ve raised their forecasts for how high the index will go while also cutting their earnings estimates. That may seem counter-intuitive, until you consider that simple discounted cash-flow analysis shows how lower rates make future earnings more valuable now, justifying higher multiples for equities even without profit growth. So, logic would dictate that the lower rates go, the better for equities. This makes Wednesday’s Fed meeting all the more important for equities, especially with the S&P 500 trading at about 18.2 times this year’s expected earnings, which is the highest since January 2018.TEA LEAVESA big drop in mortgage rates is giving new life to the U.S. housing market despite a slowing economy. The National Association of Home Builders/Wells Fargo Housing Market Index released on Tuesday increased to 68 in September from an upwardly revised 67 in August. The current level is at an 11-month high. Also on Tuesday, the Mortgage Bankers Association said its data show that mortgage applications for new home purchases increased 33% in August from a year earlier. Both reports are good omens for Wednesday’s government report on housing starts and permits. The median estimate of economists surveyed by Bloomberg is for starts to have rebounded 5% in August after falling 4% in July. Permits are seen declining 1.3%, but that shouldn’t be worrisome after July’s outsized 6.9% gain, which was the biggest since 2017.DON’T MISS Chaotic Funding Market Fell Asleep at the Wheel: Brian ChappattaStock Pickers Are Just Imagining an Index Bubble: Nir KaissarConflicted Dealers Shouldn't Advise the Treasury: James BiancoDraghi Lets Lagarde Pick Up the Pieces: Ferdinando GiuglianoEmpty Hair Salons Can't Be Saved by a Central Bank: Daniel MossTo contact the author of this story: Robert Burgess at bburgess@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

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  • JPMorgan Tells Worried Clients Rising Yields Can Help Stocks
    Bloomberg

    JPMorgan Tells Worried Clients Rising Yields Can Help Stocks

    (Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Many of JPMorgan Chase & Co.’s clients are worried that the rise in bond yields threatens the stock market rally. For the broker and a number of major fund managers it’s actually a blessing.This month’s retreat in fixed income has fueled concerns about the possible risk to the equity bull run. Yet, so far, the stock market has defied the doomsayers, and the reason behind the jump in yields -- improved economic optimism -- has reassured the likes of Eaton Vance Management and Fidelity International that the rally can continue.The flight from havens and crowded bond proxies has triggered a switch into equity sectors that are more sensitive to the economy. The broadening of the gains to include value and cyclical stocks will support the rally, said JPMorgan in a note to clients. In the past decade, equities rose every time bond yields spiked by at least 50 basis points, climbing by 6% on average, it said.The cause for the shift in sentiment is key to understanding the equity market’s nonchalant attitude toward the bond market sell-off. The rise in yields happened amid optimism that the U.S.-China trade talks will continue, which is a positive signal for economic growth and as a consequence, for stocks.“Government bond yields offer less of a signal for equity investors than they have in the past,” said Eddie Perkin, chief equity investment officer at Eaton Vance Management. “If bond yields are rising due to optimism about the economy, that should be good for equities, especially since a lot of recession fears had recently been priced into the equity market.”If the yields continue to climb rapidly or the economic picture becomes overly rosy, fueling speculation about a halt to central bank rate cuts, things could “get scary” for stocks, according to Legal & General’s John Roe. But this appears unlikely, he said.Modest investor positioning in stocks also supports the bulls. Despite the MSCI World Index posting a 17% return in 2019, investors have pulled $198 billion from global stocks, while $342 billion surged into bonds as traders sought havens amid trade-war-related concerns.“Bond yields have moved too far year-to-date as we are not expecting a recession,” said Nick Peters, a multi-asset portfolio manager at Fidelity International, which oversees about $413 billion and favors equities. “As a result, we could see a sell-off in bonds without equities being impacted in the short term.”Stocks are traditionally sensitive to sharp moves in debt, with the latest example occurring last month, when the inversion of the yield curve fueled a retreat from riskier assets. But the correlation between bonds and equities remains “resolutely” negative and higher yields shouldn’t pose a problem to stocks, according to JPMorgan.“Higher yields usually go hand in hand with improving inflation and growth outlook,” said JPMorgan strategists led by Mislav Matejka. “This is usually a good combination for equities.”This creates an environment for an equity rotation away from more defensive bond proxies and in favor of more volatile shares that are sensitive to economic growth. Financial and energy sectors have roared ahead in September, leaving the likes of real estate, healthcare and utilities behind.The Bank of America Corp. survey published on Tuesday showed that fund managers don’t expect this outperformance to last, with just 7% of surveyed investors forecasting that value equities will beat growth stocks over the next 12 months.Eaton Vance, Wells Capital Management and GW&K Investment Management are among the funds that have picked up cyclical and value stocks this month. Just like bonds, growth and momentum stocks had gotten “too expensive” and this is a “healthy correction,” said Dan Miller, a director of equities at the $40-billion GW&K.“If we do see growth expectations improve a little and inflation expectations firm a little, that could lead to an environment where yields rise and equity markets still tread water or help us touch new highs,” said Brian Jacobsen, a multi-asset strategist at Wells Capital Management.(Updates with BofA fund manager survey in third-last paragraph.)To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon, John ViljoenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.