Banking, Energy Stocks Keep Indexes Higher; SunTrust Breaks Out – Investor’s Business Daily

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The stock market padded Tuesday’s strong gains with a healthy advance by midday Wednesday. Large caps moved ahead of small caps.

Meanwhile, Atlanta-based regional banking leader SunTrust Banks (STI) continued to act well after breaking out of a nearly six-month cup-with-handle pattern with a 43.13 buy point. The stock gained 2% to 44.01, up 2% past the proper entry.

The Nasdaq composite and S&P 500 rose 0.8% to 0.9% each after advancing 2% and 1.4%, respectively, on Tuesday. The Dow Jones industrial average was also up 0.9%. Utilities continued to sink after having a white-hot first quarter. The Dow Jones utility average fell 0.7%. The small-cap S&P 600 added 0.6%. Volume was tracking lower on the Nasdaq from the previous session, but it was higher on the NYSE.

The super regional bank and money center bank industry subgroups held a spot among the top 15 advancers among IBD’s 197 industry groups in the stock market today, each rising more than 2% so far. The growing prospect of another rate hike at either the June or July Federal Reserve meetings has apparently attracted more institutional buying in lenders. Higher short-term interest rates will enable banks to charge more for loans, improving profit margins.

SunTrust suffered mightily in the wake of the subprime debt crash, as the bank suffered net losses in both 2009 and 2010, but earnings have since gotten back on track. Wall Street sees EPS rising in the low- to mid-single digits both this year and next. Pretax margin has risen sharply over the past five years, from 0.2% in 2010 to 31.5% last year. It has total assets of $194 billion as of March this year. Non-performing loans represented just 0.7% of total loans outstanding. A quarter-to-quarter increase of $303 million in such loans was due mainly to Wall Street downgrades of energy-related debt.

SunTrust gets an 82 Earnings Per Share Rating from IBD Stock Checkup. Just two other companies in its Banks-Super Regional subgroup get a higher EPS Rating: Great Western Bancorp (GWB) (92) and Regions Financial (RF) of Birmingham, Ala. (86).

The 5% buy zone in SunTrust extends up to 45.29.

Which commercial and real estate-focused bank joined IBD Leaderboard as a premium growth play that just also broke out? See it here.

Elsewhere in the market Wednesday, various oil-related stocks advanced, as West Texas Intermediate crude oil futures headed toward the $50-a-barrel level.

Drilling, field services and oil machinery subgroups paced the upside with gains of 2.7% to 3.3%. The field services is ranked highest among the three at 100th among 197 IBD groups and subgroups, as seen in IBD’s daily rankings. In the group, 800-pound industry gorilla Halliburton (HAL) (EPS 8, Relative Strength Rating 84) gained more than 2.5% in light trade to 42.53 and was looking to clear a 42.92 handle buy point in a very deep, cup-style bottoming base.

Oil States (OIS), Superior Energy Services (SPN), Archrock Partners (APLP), RPC Inc. (RES) and USA Compression (USAC) are the only other Halliburton group peers that hold an RS Rating of 80 or higher and trade at least 10 a share.