James Dennin, Kapitall: Big bank stocks release earnings this week, in what will likely be the stock market's biggest week so far this year.
As the year kicks off it's time for companies to begin reporting their earnings for the fourth quarter of 2013, and all eyes are on big bank stocks. Of the 25 companies on the S&P 500 reporting this week, over half will be in financial services.
Read more from Kapitall: 6 Foreign Stocks on US Exchanges that Bank on American Brand Names
But there's even more on the line as the earnings of banking stocks will provide some important insights into how the economy is doing.That's because with the implementation of the Volcker Rule, many banks are seeing a lot of their high-risk, high-reward traders leave for other organizations, mostly investment funds and hedge funds. Earnings will provide important insights into how these banks are really faring – and whether they're actually growing or simply cutting costs. Which in turn will shed light on how the rest of the economy is doing. A lukewarm jobs report released at the end of last week indicates that the economy may be just puttering along, while the stock market soars. This has created unusually low levels of price-to-earnings disparity in the stock market - with the exception of financial services stocks - whose valuations are still comparably very cheap. Big bank stocks have performed very well over the course of the last year, and still look inexpensive. However, they will want to show strong earnings at a time when many companies are reigning in their forecasts, if bank stocks are going to continue their growth in 2014. And if mortgages and borrowing levels don't recover, this will be more difficult for big banks to accomplish. We built this list by looking at the seven top performing stocks in the financial services sector. Do you think they'll be able to continue their growth into 2014?