Special Report: Bank of America Kicks Off Earnings Season; Dow Jumps by 550!

A new earnings season gets going this week, and some strong results are already here, most notably from Bank of America (BAC). Due to tumultuous markets, BAC said on Monday that its quarterly earnings and revenue were above forecasts. This was attributed to better-than-anticipated fixed-income trading and improvements in interest income. The bank’s Q3 report shows $24.61 billion in sales at 81 cents per share. BAC exceeded analysts’ projections on EPS and revenue by 4.48% and 4.46%, respectively.

The major indices also performed well, with the highlight being the Dow Jones Industrial Average, which closed Monday’s trading day at 30,185.82, up 550.99 points, or 1.86%. The S&P 500 and Nasdaq both finished the day with positive results as well. Given current circumstances, I’ll say it was generally a pretty damn decent way to kick off a big earnings week, or any week, for that matter.

The excitement doesn’t really even stop there. What more should we know, and how important is the information for investors? Join me to learn more about it in the full article here:

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On Monday, shares of BAC rose by 6.1% upon the earnings announcement. Brian Moynihan, the CEO of Bank of America, was expected to be one of the key winners of the Federal Reserve’s rate-hiking initiatives. As lenders such as BAC, Wells Fargo (WFG), and JPMorgan Chase (JPM) see it, the banks can generate more income when rates increase, enabling them to profit from their primary business of loans and deposits.

According to a press statement from BAC, the business recorded an $898 million provision for credit risk. Due to rising interest rates throughout the quarter and an increasing loan book, the bank’s net interest income increased by 24% to $13.87 billion for the quarter, above the $13.6 billion forecast. A crucial indicator of bank profitability, the net interest margin, increased from 1.86% to 2.06% in the second quarter, just above analysts’ expectations of 2%.

In the statement, Moynihan said that “our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts.” He continued, “Across the bank, we grew loans by 12% over the last year as we delivered the financial resources to support our clients.”

Revenue from fixed-income trading soared 27% year-over-year to $2.6 billion, easily above the $2.24 billion expectation. This more than made up for a 4% decline in equity revenue to $1.5 billion, which was less than the $1.61 billion forecast. Unfortunately, the bank’s changing provision for credit losses revealed BAC was starting to have a more pessimistic view of the economy. Before investors become involved again – or for the first time – in the battered industry, analysts have recommended that they want to see bank executives truly consider the prospect of an upcoming recession.

BAC wasn’t the only headliner on Monday, and we should never forget our major indices. As I pointed out in the intro, the Dow Jones Industrial Average performed exceptionally well, concluding the trading day at 30,185.82 after rising by 550.99 points, or 1.86%. As for the others: S&P 500 increased by 2.65% to 3,677.95. The tech-heavy Nasdaq Composite rose 3.43% to close at 10,675.80, marking its biggest day since July.

The action is being taken while stock prices are getting close to their yearly lows, and the S&P 500 has fallen for four of the previous five weeks. Though some think the market is set for a comeback, recent large movements in both directions have only exacerbated the unease on Wall Street. According to a letter to clients from Mike Wilson, Chief Investment Officer for Morgan Stanley (MS), “The 200-week moving average is a serious floor of support until companies fully confess or a recession officially arrives, both of which could take several more months and lead to a technical rally in the short term.”

The third-quarter earnings season is currently in full force. Investors are keeping an eye on whether corporate America would significantly lower their outlooks in light of the persistently rising inflation and the slowing economy. More often than not, the stock market’s response to an earnings report will provide more information than the actual earnings. Investors may be concerned about the durability of growth, growing costs, or other possible drawbacks if the metrics appear favorable but the stock still declines.

Investors should monitor firms that surpass earnings data and have significant upside responses to a market in recovery mode. Post-recovery, it may rank among the top investment options on Wall Street. No complaints there. For what I think is a fitting end to today’s piece; I discovered this little fun bit of data regarding Monday’s stock performance:

Approximately 2,647 New York Stock Exchange-listed names increased, while just 392 fell. In other words, for every stock that fell, more than six rose.

Special Report: Bank of America Kicks Off Earnings Season; Dow Jumps by 550!

Tiny Biotech Wins $75 Billion Patent

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