Despite the prospect of rising interest rates, the financial sector has been under extreme selling pressure since early January. It's been a mixed bag for first-quarter earnings for the big banks so far, with assorted beats and misses and inconsistent price action.
Bank Of America (NYSE: BAC) is trading firmly in the green following its first-quarter report and is the PreMarket Prep Stock Of The Day.
BofA's Rough Year: After ending 2021 at $44.49, the issue peaked in January at $50.08 and just above that in February, when it topped out at $50.11. It weakened to end that month at $44.20 and make a new low for the move in Monday’s session at $37.22.
At its price of $39.15, BofA is in the red for the year by 11%. That is greater than the S&P 500 index’s year-to-date decline of 7.5% at 4,400.
BofA's Poor Short-Term Relative Strength: The S&P 500 index made its yearly low on Feb. 24 and despite the recent selloff is way above that level. Meanwhile, BofA made its low for that decline at $38.17.
Both the index and BofA had major rallies off those lows that ended in late March. While the retreat in the index is still way above that low, Bank Of America went to make a new low for the move, well below its previous yearly low ($37.22 vs. $38.17).
BofA's Q1 Report: Before the open on Monday, the company reported quarterly earnings of 80 cents per share, which beat the analyst consensus estimate of 74 cents by 8.11%. This is a 6.98% decrease over earnings of 86 cents per share from the same period last year.
The company reported quarterly sales of $23.2 billion, which beat the analyst consensus estimate of $23.11 billion by 0.39%. This is a 1.16% increase over sales of $22.93 billion during the same period last year.
PreMarket Prep's Take: When the issue was being covered on the show Monday, it was trading at the $38 area. Co-host Dennis Dick was skeptical about the premarket gains.
"These banks have not been able to rally in a rising interest rate environment, [and that] is concerning," he said. “The reason for that is the recession risk. If we go into a recession, banks will not do well.”
The author of this article emphasized the importance of Thursday’s low ($37.42). With it being the low of the move, it is important for that level to hold in order for a rally to take place.
BAC Price Action: After a slightly lower open, BofA immediately bottomed just under Thursday’s low at $37.22 and began to move higher. As of 1:15 PM EST, it has rallied to $39.28 and is holding strong in the $39 handle.
Based on the daily charts, the next resistance level is not until its April 12 high ($40.08).
The discussion on Bank Of America from Monday’s show can be found here:
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