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Bank earnings could give sector another boost

JPMorgan Chase's strong results last week raised expectations for other top U.S. banks, many of which will announce earnings this week.

January 17, 2011|Reuters

U.S. bank stocks are flying high, and this week's earnings could give investors more reason to be optimistic about the sector.

Strong results from JPMorgan Chase & Co. on Friday bolstered expectations for top U.S. banks, many of which are scheduled to report in the coming week, including Citigroup Inc. and Goldman Sachs Group Inc.

Financials have been among market leaders in the recent rally, with the Standard & Poor's 500 index posting its seventh straight week of gains Friday.

While the earnings outlook is keeping alive hopes that stocks have more room to run higher, the rise in bank shares has pushed sector indexes to near resistance levels, which could signal a rest stop for the shares in this holiday-shortened week.

The market will be closed Monday in observance of Martin Luther King Jr. Day.

JPMorgan on Friday reported profit and revenue that were stronger than analysts had expected, and the chief executive said the bank could start to increase its dividend once regulators give the go-ahead, probably at the end of March.

Analysts said the news bodes well for other financials.

"Financials could very easily be one of the real darlings of this particular earnings cycle," said Burt White, managing director and chief investment officer of LPL Financial in Boston.

Financials are projected to have the highest growth rate in earnings for the fourth quarter, largely because of easy year-ago comparisons, according to Thomson Reuters data.

Overall, S&P 500 earnings are expected to have increased 32% from a year ago, the data showed.

Besides the banks, economic bellwether General Electric Co. as well as marquee tech names Apple Inc., Google Inc. and EBay Inc. are due to report.

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