Stocks Stabilize Into Friday's Session As World Digests Thursday's Panic Attack

Includes: DIA, IWM, QQQ, SPY, WFC
by: Quoth the Raven


Europe's open and U.S. futures are pointing to a much calmer open on Friday.

Wells Fargo will likely be setting the stage for the banking sector; it reports earnings pre-market today.

Portugal's Banco Espirito offered a liquidity snapshot to assure the world the bank is stable.

Stock futures, at least early out of the gate on Friday, look to have stabilized. This comes after yesterday's shellacking at the open and a trading session that spent most of its time trying to recover from the initial onset of selling brought on by, in technical financial terms, a giant SNAFU served up from Portugal, France, and China. It was a mix of questions regarding a Portuguese bank, combined with trade and export data so poor, when Joe Kernan reported it on CNBC, I found myself - for a second - no longer wondering whether or not he wears a wig.

Stocks spent the better part of yesterday doing well to offset and pare the losses that spiked at market open. From there, saner heads seemed to prevail. QTR advised he'd be buying into the selling yesterday, a method that worked out well, with the exception of some speculative Priceline (NASDAQ:PCLN) calls that expire today.

At the end of trading yesterday in Europe, stocks also looked to be stabilizing. The closing of the European markets, combined with further clarity about the exposure that Portugal's banks had did well to calm things down heading into the end of the trading session. The Dow ended off just a fraction of what it sold off on the ugly open. Bloomberg noted this morning that Banco Espirito, the culprit to Thursday's mess, came out and gave the market a snapshot of its liquidity:

Banco Espirito Santo SA sought to reassure investors by revealing its exposure to related companies after a missed payment on short-term debt by a member of the Portuguese group roiled global markets.

The nation's second-biggest bank by market value said it had 1.18 billion euros ($1.6 billion) of loans, securities and other items linked to Grupo Espirito Santo as of June 30, according to a filing. The lender also said that it has a buffer of 2.1 billion euros above the regulatory minimum following a capital increase in June.

The bank provided the update after a parent company, Espirito Santo International, said it missed payments on commercial paper. While the nation's central bank sought to reassure markets that the lender's solvency is "solid," the lack of transparency in the corporate structure jolted investors. European stocks and Portuguese bonds rebounded today after a selloff yesterday.

The European markets opened for trading today looking much stronger.

(Source: CNBC)

Of course, setting the tone for the banking sector is going to be Wells Fargo (NYSE:WFC) - the U.S.'s largest mortgage lender. Consensus estimates are calling for the bank to post EPS of $1.01 and revenue of $20.8 billion. The bank's results today will likely dictate how the banking sector fares at the open. As we know, banks like Bank of America (NYSE:BAC), Citi (NYSE:C) and JPMorgan (NYSE:JPM) all usually play off of each other's earnings report, dictating a feel for the entire sector.

With the exception of Well Fargo's report, CNBC notes that there isn't too much on the economic calendar to end the week today:

The U.S. Treasury is due to release its monthly budget statement Friday, but beyond that no major data releases are expected. Atlanta Fed President Dennis Lockhart and Chicago Fed President Charles Evans will speak on the economy later in the day.

Those that were buying them up yesterday, off the efforts of the sellers, could likely see a nice green start to the day today. Moving very early in the pre-market session were Bank of America, Intel (NASDAQ:INTC), and Apple (NASDAQ:AAPL).

Disclosure: The author is long AAPL, PCLN. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.