Bank of America Pushes Higher Ahead of Earnings

NEW YORK ( TheStreet) -- Bank of America ( BAC) was the winner among major U.S. banks on Tuesday, with shares rising 2.1% to close at $16.72.

The Dow Jones Industrial Average rose 0.7%, while the S&P 500 was up 1.1% and the NASDAQ Composite added 1.7%, after the Census Bureau said total U.S. retail sales during December rose 0.2% from November, while rising 4.1% from a year earlier, on a seasonally adjusted basis.  The December figure came in ahead of the consensus estimate of a 0.1% increase, among economists polled by Reuters, but the month-to-month pace of growth slowed from an upwardly revised 0.7% in November.

Excluding auto and parts sales, retail sales increased at a pace of 0.7% during December, significantly ahead of the 0.4% expected by economists.  These sales were 3.7% higher than in 2012.

"Any way you slice it, headline sales, headline sales ex autos or headline sales ex autos and gasoline rose just 0.4-0.5% on average throughout the final quarter of the year compared to a 0.2-0.4% pace in Q3, hardly the gangbuster level anticipated to keep upward momentum in GDP from third quarter's impressive pace. A loss of momentum in consumer spending, coupled with a reduction in inventory is likely to translate into sub-2% GDP at the end of 2013 schedule to be released January 30," wrote Sterne Agee chief economist Lindsey Piegza on Tuesday in a note to clients..

This sort of "bad news" is good news for the broad market when the economy is growing and short-term interest rates are close to zero.  As a group, investors prefer to see the Federal Reserve keep the short-term federal funds rate in its current range of zero to 0.25% as long as possible.

The KBW Bank Index ( I:BKX) on Tuesday rose 0.5% to 70.20 with all but three of the 24 index components ending higher.

Bank Earnings Begin

JPMorgan Chase ( JPM) kicked off earnings season by reporting fourth-quarter earnings of $5.3 billion, or $1.30 a share, slightly below the consensus EPS estimate of $1.35, among analysts polled by Thomson Reuters

While the results were disappointing in some respects, JPMorgan reported a respectable return on tangible common equity (ROTCE) of 14%, down from 15% a year earlier.  Most of the legal settlements the company entered into during the fourth quarter -- including $17.5 billion in residential mortgage-backed securities settlements with government authorities an investors -- had previously been reserved for.  But the fourth-quarter after-tax results, as previously announced, were lowered by lowered by $850 million, as a result of the bank's $2.6 billion settlement with the Department of Justice and regulators over its role in the Bernard Madoff Ponzi Scheme.

JPMorgan's shares were up a nickel to close at $57.76.

Please see TheStreet's earnings coverage for much more on JPM's fourth-quarter results and the company's outlook for 2014.

Wells Fargo ( WFC)  reported fourth-quarter earnings of $5.6 billion, or a dollar a share, beating the consensus EPS estimate of 98 cents and rising from 99 cents the previous quarter and 91 cents a year earlier.  The company's earnings for all of 2014 totaled a record $21.9 billion, or $3.89 a share, making Wells Fargo the nation's most profitable bank.

Wells Fargo's full-year earnings were up 16%, as declining credit costs and lower expenses more than offset a large decline in mortgage banking income and a slight decline in net interest income.

Wells Fargo's shares were unchanged at $45.56.

In light of the significant rise in long-term interest rates during 2013, which lead to a great curtailment of the wave of mortgage refinance application, the Mortgage Bankers Association on Tuesday lowered its forecast for 2014 one-to-four family mortgage loan originations by $57 billion to $1.2 trillion.  To put that full-year forecast into perspective, the MBA estimates mortgage loan originations totaled $1.755 trillion during 2013, declining from $2.044 trillion during 2012.

Next: Bank of America

Bank of America will announce its fourth-quarter results early Wednesday, with analysts estimating earnings of 27 cents a share, down from 28 cents the previous quarter and 29 cents a year earlier.

Please see TheStreet's earnings preview for more on what to from Bank of America, including the company's massive cost-cutting program.

This chart shows the performance of JPMorgan Chase, Wells Fargo and Bank of America against the KBW Bank Index and the S&P 500 since the end of 2011: 

JPM Chart data by YCharts

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