Dow Jones futures fall slightly late Monday, along with S&P 500 futures and Nasdaq futures. The S&P 500 index and Dow Jones hit new highs Monday for the current stock market rally. Banks were big winners in Monday's stock market, with JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) all rising 3.4%; Goldman Sachs (GS) 2.5% and Wells Fargo (WFC) rose 1%. But while JPMorgan stock and Citigroup stock may well be in the short term, don't expect bank to lead over the long term.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures solves 0.1%. Nasdaq 100 futures fell 0.15%.
Remember that overnight action in futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session. However, Dow Jones futures did signal Monday's strong open.
Current Stock Market Rally
The Dow Jones rose 1.3% and the S&P 500 index advanced 1.2%, both hitting 2019 highs. The Nasdaq composite climbed 1.3%, closing just below its best levels of the current stock market rally. There were few breakouts as some of the very top stocks lagged or even lost ground. Many of the big winners were stocks well off their highs, including banks such as Citigroup and Bank of America.
Still, with the S&P 500 and Dow Jones hitting new highs, the current stock market outlook continues to improve. This is a good day to read The Big Picture
Arguably, Monday was a day for ETFs, as a way to play or follow various sector moves. The VanEck Vectors Semiconductor ETF jumped 2.5%, moving back into a buy range. The ETFMG Prime Mobile Payments ETF (IPAY) advanced 1.6%. The IPAY ETF – which includes Mastercard (MA), Visa (V), PayPal (PYPL), Square (SQ) and many other names – is still in buy range.
The SPDR financial ETF (XLF) ran up 2.45%, reclaiming its 50-day line, but it's still below its 200-day average.
Bank Stocks: JPMorgan, Goldman Have A Good Day
JPMorgan stock and fellow Dow Jones component Goldman Sachs were among the many bank stocks having solid days. Global growth fears eased Monday on upbeat China and U.S. manufacturing data. Long-term Treasury yields rose, expanding the positive yield curve after the partial inverted yield curve ended Friday.
The traditional banking business model is to borrow short and lend long. That doesn't work when short-term yields are above long-term yields. It is also a sign of weak economic growth, which is bad news for landing demand and even loan delinquencies.
If the economic outlook brightens, bank stocks are likely to benefit from a widening yield spread. The stock strength is longtime laggards
The relative strength line for JPMorgan stock hit at 21-month low late last month. The RS line tracks a stock's performance vs. the S&P 500 index. And JPMorgan stock is arguably one of the better-performing big financials in recent years.
The RS lines for Citigroup stock, Bank of America stock and the XLF ETF look similar. The RS line for Goldman recently hit its worst level since 2008, as the investment bank rules from the Malaysia 1MDB scandal. Wells Fargo's relative strength is at its lowest level since late 2009, as its ongoing scandals drove another CEO's exit.
Bank stocks' last big stretch or outperformance was in the months before and after President Donald Trump's election. Trump's pro-growth economic platform was bullish for banks, as was its pledge to ease post-crisis banking regulations.
Bank stocks are a big market weight, especially in the S&P 500 index. And banks tend to rise and fall with the economy. So good news for the banks is likely to be positive for the stock market broader.
At best, bank stocks will tend to track the market over time. But rather than take on stock or sector-specific risks with bank stocks or ETFs, investors looking to match the market should consider an index ETF or mutual fund.
Please follow Ed Carson on Twitter at @ IBD_ECarson for stock market updates and more
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