The focus of this season was the earnings from the banking sector, and was led by the US banking sector after analysts, and the managements cited headwinds. Meanwhile, catalysts have taken a toll on the reported first-quarter financial earnings.
Ahead of the rising concerns in the market, it has sent investors to remain cautious and banks were dragged, citing worries over their sluggish revenue and overall profits.
Lower oil prices since last year, has brought negative sentiments in the markets, which has led many to remain wary about a potential economic slowdown and a recession.
Subsequently, oil prices declined before 2015 ends, after removing sanctions on Iran. It was followed by the imbalance level of the supply and demand of oil, affecting the prices.
Meanwhile, a minute of sluggish economic movement was seen by China, the second largest consumer of the commodity, implying for a further decline in demand, while supply remained to balance demand.
As for the oil industry, earnings were severely affected by declines in the commodity prices, further pushing an aggressive cost saving measures, including asset divestitures, and reduction in capital spending. Meanwhile, the energy sector made its way on the first quarter of this year.
At the start of 2016, it has seen the worst, led by declining bank stocks, although an uplift was witnessed in the interest rates from the Fed. Many of the big bank stocks have begun losing their gains after hitting their 52-week highs in July the prior year, while some hit their 52-week lows. The downward movement was fueled by the mixed negative sentiments.
Conversely, earnings from the bank sector remained challenged by a sharply higher provision expense as an energy reserves were built, however, improving oil prices involves a tail risk off the table.
As oil prices continue to rally, ongoing stress in energy sector remained unclear. It is likely that the near-term energy volatility will dominate as to how shares of the bank are traded in the next several quarters.
Furthermore, a slight change is expected on the future prospects of the bank’s earnings, citing oil prices that continue to increase and a potential reversal in the capital markets business, where a strong activity in the second quarter of the fiscal year 2016 is expected.
Bank of America Stocks
Bank of America (BAC) was seen of a potential decline in short interest in April. It was reported that a short interest worth 67,740,471 shares were witnessed as of April 15th, suggesting about 12.9% decline from the March 31st totaling 77,730,773 shares.
Apparently, about 0.7% of the shares of the stock were shortly sold. The days-to-cover ratio currently settled in 0.7 days, according on an average daily volume worth 94,753,618 shares.
Many research firms currently weigh in on the BAC’s stock. Vetr lifted shares of the company from a rating of “Hold” into a “Buy”, and gave a price objective of $15.87 on April 26th. Goldman Sachs reissued a rating of “Buy” and set a price objective of $17.00 on April 19th. Societe Generale reaffirmed a rating of “Buy” on April 18th. Robert W. Baird reiterated a rating of “Buy” on April 17th. Lastly, FBR & Co. restated a rating of “Buy” on April 17th.
Two analysts of which gave a sell rating on the stock, six have set a rating of hold, and twenty-three have assigned a rating of buy. Thus, the average rating of the stock settled at “Buy,” including a consensus price objective of $17.87.