After the Dow Jones fell for the third straight day yesterday, investors will brace for weakness in the online banking sector. Discover Financial (DFS) lost 9.7% in after-hours trade last night.
Discover posted fourth-quarter revenue of $4.20 billion, beating estimates. Markets fretted about the firm increasing its provision for credit losses rising to $1.91 billion. In Q3, it was $1.7 billion and in Q4/2022, it was $883 million. Discovery’s net principal charge-off rate increased to 4.11% in Q4 compared to 3.52% in Q3.
December housing starts and building permits data will put home builders and real estate stocks in the spotlight. Opendoor Technologies (OPEN), Redfin (RDFN), and Zillow (Z) are all well off their December 2023 rally. Understandably, the sector is among the stocks that rallied on false expectations that interest rates would fall several times in 2024.
Strong housing starts would increase supply and lessen the pressure on home prices. This would help justify the Fed in cutting rates in early 2024.
In the resource sector, Talos Energy (TALO) is in a downtrend after launching a $300 million public stock offering. It also expects Q4 revenue of $380 million – $395 million, within market expectations.
Expect Alcoa (AA) to trade lower after it posted Q4 losses of $150 million (GAAP), or 84 cents a share. For 2024, it will produce up to 10 million metric tons of alumina.