Capital One: Financial Winner
The broad indexes all saw 2% gains, after The National Association of Realtors reported that sales of existing homes increased in October by 2.1% to a seasonally adjusted annual rate of 4.79 million, from a downwardly revised 4.69 million in September.
October existing home sales were 10.9% above the annual rate of 4.32 million-unit level in October 2011. Economists, on average had expected an annual rate of 4.75 million existing home sales in October, according to Briefing.com.
Investors continued to anticipate a deal between leaders of Congress and President Obama to avert the "fiscal cliff," an its combination of an expiration of tax cuts that were enacted when George W. Bush was president and extended in 2010 by President Obama, as part of a deal with Republicans to raise the federal debt ceiling. Without a new deal, many economists believe that the tax increases and concurrent required cuts in federal spending cut push the U.S. economy back into recession.
KBW economist Maury Harris early on Monday wrote that "among recently polled economists, 84%--including ourselves--expect a deal. However, only 38% of polled adults anticipate an agreement, with that sentiment being echoed in a very worried stock market."
Harris added that even some of the big government spenders are worried: "Meanwhile, in Washington DC, the Defense Department is apparently taking no chances and is feverishly spending funds before they possibly become sequestered."
Then again, Harris indicated that the Federal Reserve could see quite a boost to its suffering credibility in the event that there is no deal to resolve the fiscal cliff, because "tighter fiscal policy might become a positive, not just for the positive impact on the deficit, but also because it could allow the Fed to become the first central bank to successfully."
the KBW Bank Index (I:BKX) rose over 2% to close at 48.20, with all 24 index components showing gains.
Stifel Nicolaus analyst Christopher Mutascio early on Monday upgraded Bank of America to a "Buy" rating, with an $11 price target, saying "we like the combination of the company's potential EPS growth trajectory, its improved capital position and likely dividend increase, leverage to what is working in the current environment (mortgage origination and debt underwriting) and our belief that it is under-owned."
Mutascio America will earn 92 cents a share in 2013, with EPS of $1.20 a share in 2014," and said that his estimate of 30% EPS growth in 2014 compares to a "median increase of less than 5% for the rest of our