Dr. Stoxx
Stock Trader & Author, Oxford DPhil, Trading Education
Citizens Financial looks cheap against its earnings, at 14x trailing and 10x next year's when banks usually get 12x. Fair value is $69.04-$87.87, or 12x next year's $6.54 EPS give or take 12%, so at $63.07 it trades 9% below the low end; it gets expensive above $73.44. The view leans on forecasts, with forward earnings 42% above trailing, and is levels only, with no fundamental work. x.comÂ
Falling rates and buying in financials, consumer discretionary and Home Depot make US small caps a very good buy here with high probability. The drawdown exceeds 11%, as it did at the start of the Iran war, and daily RSI and MACD are at similar bottoms. x.comÂ
Banks and XLF look to have bottomed this past week, supporting a local bottom in US small caps. Stockspy1 noted that the Russell 2000 includes many regional banks, linking the banking-sector turn to IWM. x.comÂ
Bank stocks look buyable if systematic selling is reacting to a flatter yield curve: the front end that drives earnings has barely moved. JPMorgan and Citi card spending rose 10% and 13%, and Citi and Wells Fargo reported lower credit losses. Wells expects steady margins and improving interest income as loans grow and old fixed-rate assets roll into higher yields. Funds crowded into banks before results, limiting near-term buyers. x.comÂ
Small caps, housing stocks and unprofitable tech that ran on rate-cut hopes face a sharp repricing, as odds of a rate hike at the Fed's July 29 meeting tripled in a week. Oil surged near $100 after Houthi attacks on Saudi tankers, new global tariffs lifted inflation expectations and the 10-year yield hit 4.71%. A Wells Fargo strategist said the Fed may need to hike more and faster than expected. With consumers already fragile, a hike would reprice small caps overnight. x.comÂ
Rate-hike fears are dragging down the whole lending sector, making Figure Technology look like a bargain around $25. That sector selloff could offer an opportunity over the next few months. x.comÂ
US consumer cyclicals and broad market breadth look set to gain as Q2 bank results refute the K-shaped consumer doom thesis. Card spending rose 9% to 12% at JPMorgan, Bank of America, Citi and Wells Fargo while credit quality improved: JPMorgan's card net charge-off rate fell to 3.34% from 3.47% and it cut full-year guidance, and Wells Fargo's credit-loss provision fell 9%. With rate tailwinds and falling gas, retail, transports, regional banks and equal-weight stocks signal a cyclical rotation. … Show more
Banks' weak response to earnings despite low expectations warrants caution into the rest of Q3 reporting. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs all fell after mixed results, while the bank ETF also declined. x.comÂ
JPMorgan is buyable on pullbacks to its daily 9-period moving average ahead of an earnings run-up in early July, with financials such as Goldman Sachs, Citigroup, Interactive Brokers and Bank of America doing great. x.comÂ
US regional banks are among the underowned, lower-volatility areas now ripping, driven partly by earnings and an overall rotation. Alongside transports, medical devices and homebuilders, they are drawing money as overcrowded, highly margined, growth-at-any-cost areas such as semiconductors are unwound. x.comÂ