We start off today by looking at yesterday’s Overnight Trade of the Day, Citigroup Inc. (C). We picked the stock based on the prospects of solid earnings from JPMorgan this morning, which we got. Yet, even with the beat, C is down slightly in pre-market trading. The market has not taken these earnings as well as I had suspected. People are paying more attention to JPM’s revenue miss than their outstanding profit beat. A number of economic indicators, however, it appears will make or break the day, so we will need good news out of the industrial production report and Consumer Sentiment Index. We are going to obviously hold onto C for now.
Let’s get into today’s picks.
Buy Pick of the Day: Ultra Proshares Financials (UYG)
Analysis: Although a lot of the major money center banks are yet to react to the earnings beat by JPMorganChase. I think we are going to see a rally around the financials today. JPM was projected to report earnings with an EPS of 0.61, but they beat that with earnings of 0.74. The stock is down slightly, but my suspicion is simply that there was so much other economic news on the front today that had not been released earlier that we had not seen a major move. At 8:30 AM, we got the CPI numbers right at the levels we were expecting and the NY Manufacturing Index beat its December estimates. Since those reports came out, futures have come down almost to a neutral level from being down over 30 points before the reports.
I see this as a pretty good sign that the market is getting ready to rally. The 9:15 AM Industrial Report and 9:55 AM Michigan Consumer Sentiment Index will go a long way to continue this upward trend. Further, I think at some point investors will look at the JPM earnings and Intel earnings’ beats and get excited about them. The company was pretty cautious about their earnings due to credit losses and the fact that they missed revenue estimates, but they were free of one-time items and were able to keep costs down to make considerable profits.
CEO Jamie Dimon, though, singlehandedly downplayed the earnings with his commentary, “Though these results showed improvement, we acknowledge that they fell short of both an adequate return on capital and the firm’s earnings potential.”
Ouch.
So, the question then is do we think financials will go up…
