Markets flipped from correction to rally mode last week after the big banks reported better than expected earnings causing the Dow to jump by 1,100 points and erase a selloff that occurred early in the week. The Dow posted an overall weekly gain of 1.58% but volatility was high as inflation and interest rates continue to plague economic progress. This week will be another active session of earnings reports as Tesla posts earnings on Wednesday along with several other large names. The Dow today closed lower by 36 points at 35,258. Trading volume was down and IBD indicators have flipped positive as of last Friday.
The Economy and Earnings
Big banks reported earnings and the gravy train continues as they posted massive profits and beat guru estimates. The leader of the pack was Bank of America which posted a 11% gain in revenues and a 67% jump in profits. The bank benefited from strength in consumer and commercial banking and a $1.1 billion drawdown of reserves thanks to continued declines in loan default rates. Wells Fargo, Citigroup, JP Morgan, Morgan Stanley and Goldman Sachs also posted strong numbers and sent a strong signal that the US banking system is in good shape and flush with cash.
Tacoma based Columbia Bank and Oregon based Umpqua Bank have agreed to a merger which will create a sizable regional bank with a market cap of approximately $7 billion dollars. Shares of both company’s fell on the news with Columbia pulling back 12% while Umpqua retreated almost 3%. This indicates that Mr. Market was not happy with the news but time and more information could assuage concerns. The merger is like two rivers, the Umpqua River and the Columbia River coming together and the gurus are worried about too many dams or obstructions to progress. I wonder if they will call the new firm Columpqua or “Lumpy” for short.
Items of Interest
The scout trip scheduled for this past weekend was canceled due to lack of interest. Bummer! These kids gave up a chance to be miserable. The Troop 100 Venture Crew however went on a hike to the coast and the weather was good. I am currently hoping to set up a snow hike for February. We usually go to Blewett Pass or the Lake Kachess area.