U.S. Stocks Surge in Anticipation of Earnings Flurry

While investors have been keeping an eye on key indicators that show signs of a potential downturn in the stock market, U.S. stocks have surged as anticipation is growing in regards to a flurry of earnings reports from banks. The economy is considered by many experts to be headed into a transitional phase, as the U.S. Federal Reserve discusses when to raise the rate at which it lends money to financial institutions.

The global economy has also been weighed by concerns regarding whether China can maintain its current growth rates and Japan can take appropriate measures to refire its financial engines.

Those concerns, however, have done nothing to dampen the enthusiasm of stock buyers, who appear to be looking ahead to the earnings season and what the major banks have to say about their own circumstances. Several of the large banks have seen their stock prices remain muted due to conditions imposed by the U.S. government as part of the widespread bailouts following the 2007 global financial crisis. One condition of the bailouts that has troubled buyers is the say that the U.S. government has regarding which companies can raise their dividends and when.

Investors are largely betting that the worst problems for the banking industry are behind the market and compliance with government requirements should lead to dividend increases from a number of institutions. Two major firms that the market has been eyeing for years are Bank of America and Citigroup. Both were subject to strict tests of their financial stability following the bailouts, and many investors expect their stock values to begin moving upward as their earnings outlooks improve. Citigroup also has significant exposure to overseas markets, and investors will look to its earnings report for signs that the global economy is improving or may be headed toward another recession.

The market will also be looking to companies like JPMorgan and data from retail sales in the United States. The major banks have significant revenue streams tied to processing of retail transactions, and earnings reports will be scoured for evidence of whether the broader American economy is heating up or cooling down.

China reported weakening trade data, and some analysts worry that the country may elect to devalue its currency in order to maintain current trade surpluses. The regional stock markets appeared unperturbed by the news, with exchanges in both Shanghai and Hong Kong hitting new historical highs.

Gennady Barsky is Chief Financial Officer and Vice Chairman of JetSmarter, the largest Private Jet Marketplace in the World.