The broad indices all ended with gains of over 1%, and the KBW Bank Index (I:BKX) was up 1.7% to 67.26. Thursday's action brought the KBW Bank Index close to the level it was at before Monday's big market drop, caused in part by investors' reaction to disappointing manufacturing numbers at home and in China.
The Department of Labor on Thursday said first-time unemployment claims for the week ended Feb. 1 totaled 331,000, down 20,000 from an upwardly revised 351,000 the previous week. Economists polled by Thomson Reuters on average had expected the figure for the week ended Feb. 1 to decline to 334,000.
The four-week average for initial unemployment claims rose slightly from the previous week to 334,000.
Thursday's upbeat labor report, followed by a report on Wednesday from Automatic Data Processing that the U.S. economy added 175,000 nonfarm private-sector jobs during January, leads investors to this week's most important employment report, which will be the January Employment Situation report from the Bureau of Labor Statistics.
Investors were disappointed with the December numbers, even though the U.S. unemployment rate declined to 6.7% from 7.0% the previous month, because the U.S. economy only added 74,000 nonfarm jobs during the month. The improved unemployment rate during December was driven by a 0.2% decline in the labor participation rate to 62.8%. The labor participation rate was down 0.8% during 2013 from 2012, as a large number of people left the work force.
Economists on average expect the January unemployment rate to remain 6.7%, with nonfarm payrolls growing by 189,000.
Deutsche Bank analyst Joseph A. LaVorgna in his firm's morning research report wrote that based on the ADP report, he had lowered his estimate for the Friday nonfarm employment growth number to 1750,000 from 200,000, while leaving his estimate for the January unemployment unchanged at 6.5%. LaVorgna's projection for a further decline in the unemployment rate "is due entirely to another anticipated decline in the labor force participation rate, a function of unemployed people leaving the workforce after their extended unemployment insurance benefits expired on December 28," he wrote.
So Friday's report may include a decent employment growth number, but it is difficult to predict how investors will react to what will probably be another significant decline in the labor participation rate.
In an interview with Joe Deaux, Thom Fross, the co-founder of Fross & Fross Wealth Management of Florida, said the Thursday jobless claims report contained "fabulous numbers," and said "the private sector [is] just not laying off as they were in the past."
"These numbers are not as good as they were in October, but if we look back to where we were in 2009... we were losing 695,000 jobs [per month]... this number is fabulous," Fross said. He expects the January employment growth number to come in at 180,000.
Shares of Regions Financial of Birmingham, Ala., have returned 4% this year, following a gain of 40% during 2013. The shares trade for 1.4 times their reported Dec. 31 tangible book value of $7.54, and for 11.0 times the consensus 2015 EPS estimate of 93 cents. The consensus 2014 EPS estimate is 86 cents.
Evercore Partners analyst Andrew Marquardt in client note on Thursday outlined his view that the heavy discounts on large-cap bank stocks, as compared to smaller regional banks and the S&P 500, was likely to narrow this year, and that the big banks were "well positioned near-term." He included Regions in his list of "top picks" among bank stocks.
This chart shows the stock performance of Regions Financial against the KBW Bank Index and the S&P 500 since the end of 2011:
data by YCharts
Ex-SAC Manager Martoma Convicted of Insider Trading