The market opened lower today based on the bad news issued by Bank of America (BAC) a Dow component. BAC missed its earnings estimates indicating a drag on consumer portion of the economy. BAC is the largest of the money center banks whose business model is tied to the retail consumer. BAC's earnings miss suggest as the other indicators suggest that the consumer is facing hard times and if Domino's Pizza reports that consumers are eating less pizza, the outlook is not bright. BAC reported over $717 million in trading losses in their investment banking division. BAC also added to loan loss reserves indicating more losses in the future. The earnings miss was reflected in the stock of BAC opening down sharply currently trading at $48.26. Given BAC trades with low volatility, the downward price is a tremendous blow to a Dow component.
Our GOIH's Quantitative Finance Group (QFG) has developed a proprietary Monte Carlo model based on the stochastic variables of housing starts, interest rates, an index composed of BAC, WMT, TGT, GM, HD, Crude Oil price, Dollar/Euro translation, and Dollar/Yen translation, as a predictor of economic activity in the domestic economy.
Our Quant staff is calibrating the model after the BAC earnings miss and we will have a list of investment opportunities based on the output of the model on Monday of next week, which we will report here.
Etrade (ETFC) is down again today based on horrible earnings. The market is punishing ETFC for their business practices.
