Over the last four trading days, performance of bank stocks was bearish as a number of issues, including a few that have direct bearing on the banks’ performance, shook the markets. These resulted in negative investor sentiments, leading to a slide in banking stocks.
Yield curve inversion along with the expectations of slowdown in economic activities and the U.S.-China trade war worries led to bearish market sentiments. For banks, which benefit from steepening of yield curve, inverted yield curve is bad news. This could lead to a decline in net interest margin.
Additionally, the inversion might result in a halt in the Fed’s interest rate hikes. Already the Fed Chair has indicated that rates are near “neutral.” With the inversion of yield curve, the chances of hikes are further likely to diminish.
Apart from these domestic issues, Brexit-related concerns persisted. All these matters significantly hurt investor sentiments and dragged the SPDR S&P Regional Banking ETF (CO:KRE) and SPDR S&P Bank (NYSE:KBE) ETF KBE lower.
Now coming to the company specific developments, Wells Fargo (NYSE:C) continued to face issues related to the fake sales scandal. Other than that, banks’ quarterly and long-term guidance as well as business expansion strategy remained in focus.
2. At the 2018 Goldman Sachs (NYSE:GS) US Financial Services Conference in New York, top executives of Bank of America (NYSE:C) , JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) presented divergent trading revenues outlook for the fourth quarter. Banks seem to be skeptical about the quarterly performance amid global market turmoil and uncertainty over ongoing developments, including easing of regulations along with expectations of slowdown in the economy and inflation worries. (Read more: Big Banks' Trading Outlook Indicates Mixed Q4 Performance)
3. Fifth Third Bancorp (NASDAQ:FITB) is optimistic about its growth prospects and has raised long-term financial targets, which were announced at an investor conference. The key reason behind the positive expectations is the bank’s planned acquisition of Chicago-based MB Financial. (Read more: Fifth Third's MB Financial Buyout Leads to Higher Targets)
4. Moody's Investors Service has placed the long-term and short-term ratings of BofA under review for possible upgrade. The rating agency had upgraded the company’s ratings last December. Since then, the bank has made significant progress in sustaining and further improving profitability. (Read more: BofA's Ratings Under Review for Upgrade by Moody's)
5. JPMorgan is planning to expand its presence in Europe by offering commercial banking services to mid-sized firms, per Reuters. Nonetheless, Doug Petno, the CEO of the company’s commercial banking unit has not yet announced his plans. (Read more: JPMorgan Seeks to Expand Commercial Banking in Europe)
Here’s how the seven major stocks performed:
Over the last four trading sessions, Citigroup and BofA were the major losers with their shares declining 7.3% and 6.9%, respectively. Also, shares of Wells Fargo fell 5.9%.
In the past six months, share price of BofA and Capital One has decreased 11.6% and 11.5%, respectively. On the other hand, U.S. Bancorp stock has rallied 2.4%.
Over the next five trading days, performance of bank stocks will likely remain the same unless any unexpected event occurs.
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