US benchmarks hit 1-month highs after boost from bank earnings

Summary:

• US indices trading in the green ahead of the open

• Stimulus from China and pleasing results from the banks behind the gains

• US30 hits highest level in over a month at near 24100

There’s been a small move higher in US stock futures ahead of this afternoon’s cash open with the announcement of some stimulus measures from China’s central bank and better than expected earnings results from major US banks improving sentiment. PBOC stated overnight that they would perform a record $84B liquidity injection into the country’s banking system and these measures will go some way to allaying fears surrounding the world’s 2nd largest economy after the dismal trade data earlier this week. While the news from the Far East has helped lift sentiment, better than expected trading updates from Bank of America (BOFA) and Goldman Sachs and have had a more direct impact on US stock benchmarks with both banks seeing sizable gains in pre-market trade.

BOFA announced that their quarterly profit had tripled to a record $7.3b, driven by a strong performance from the company’s consumer banking business as well as lower corporate taxes. With the firm buying back $26b in common stock this resulted in an earnings per share (EPS) of $0.73 vs an expected $0.63. Turnover was also strong, coming in at $22.7b vs a forecast $22.4b.  “Operating leverage based on disciplined expense management while investing in our future, solid asset quality, and loan and deposit growth drove this quarter’s results,” CEO Brian Moynihan said in a statement. “Through the trillions of dollars of consumer transactions we process and from the steady confidence and activity of our small business and commercial clients, we see a healthy consumer and business climate driving a solid economy.” Shares are called to open around 5% higher according to the pre-market.

Bank of America is expected to see gains of as much as 5% when trading commences this afternoon after an all-round solid earnings update. The market will likely trade back above the 50% retracement of the declines seen from the August 2018 high to the December low. Source: xStation

Results from Goldman Sachs are also out ahead of the opening bell, and they also announced better than expected figures. The top-line beat was driven by strong equities trading, which more than offset the weak levels of bond trading, and saw revenue come in at $8.1b. While this was better than the forecast numbers from the street it does still represent a 1% drop from the same period last year. EPS came in a $6.04 compared to -$5.51 a share last year when the bank too a huge write-down because of the enactment of the next tax code. The stock is rallying by around 2.5% in the pre-market in response to these results.

Goldman Sachs is also called to open higher, by around 2.5%, and the stock is expected to move back above the 23.6% fib at 180.64 of the large decline from the March high to last month’s low. Source: xStation

The afternoon’s economic calendar is looking fairly bleak with the US December retail sales not released along with business inventories due to the ongoing government shutdown. This is now 25 days and counting for the shutdown. The US30 is the biggest riser amongst large-cap US indices so far today and the market is now attempting to break above potential resistance around the 24100 mark. The 8 and 21 EMAs have now printed a bullish cross, but it should be noted that this signal hasn’t worked too well of late with the last two bullish crosses occurring near market highs. If price can get above the 24100 level then the outlook improves for longs, but a break above 24235 is really needed before we can expect a significant extension higher. Any reversal signals in this region on D1 could offer attractive risk:reward opportunities to go short given that price has rallied over 2500 points in just a few weeks.

The US30 has moved up to its highest level in a month and the market is looking to break through possible resistance from 24100-24235. The 8/21 EMAs have printed a bullish cross but the last couple of times this has happened it has proved be a false dawn for longs. Source: xStation