Bank Stocks Slump on Revived Global Growth Worries
March 21 2019 - 1:11PM
Dow Jones News
By Jessica Menton
Bank stocks fell broadly Thursday, their second straight day of
declines, after the Federal Reserve signaled caution on U.S.
economic growth.
Shares of JPMorgan Chase & Co., Wells Fargo & Co., Bank
of America Corp. and Citigroup Inc. all slipped more than 1% in
midday trading. Losses also spread to European banks, with Barclays
PLC and Royal Bank of Scotland PLC dropping at least 1.7% each.
The KBW Nasdaq Bank Index of large commercial lenders shed 1.3%
Thursday after dropping 3% a day earlier, its biggest one-day
percentage loss since Dec. 4. The index, which has climbed 12% in
2019, is down 4.3% this week, on pace for its largest weekly
decline since December. Financial shares in the S&P 500 were
the only group in the red Thursday, down 0.5%.
The Fed said Wednesday that officials were unlikely to lift
interest rates this year, sparking concerns that slowing global
growth is beginning to spill over into the U.S. economy.
The Fed also announced plans to end the runoff of its $4
trillion asset portfolio at the end of September, sooner than most
investors were expecting. The balance-sheet runoff has been a
source of concern for investors amid worries that it will tighten
financial conditions.
Banks are among the most economically sensitive stocks and
typically reflect investors' outlook for the broader U.S. economy.
If the declines continue, it could spell further trouble for global
growth. Anxiety over tepid economic activity has sparked worries
about demand for bank loans for industries tied to the strength of
the U.S. economy, including the housing and auto markets.
"The banks are key components to our economy, so much that if
they don't do well, they're a drag on the market and the economy as
a whole," said Ed Cofrancesco, chief executive of International
Assets Advisory LLC, an Orlando, Fla.-based brokerage firm. "The
Fed has made it quite clear that they're going to reduce their
balance sheet, which means they're going to be buying less bonds,
which will have a negative drag on the banks."
Bond yields also slumped, which tends to hurt bank stocks
because their lending profitability typically rises when rates are
higher. The yield on the benchmark 10-year Treasury note, a
barometer that influences borrowing costs for consumers,
corporations and state and local governments, fell to 2.521%
Thursday from 2.537% Wednesday, on pace for its lowest level since
January 2018.
A flattening yield curve -- the gap between yields on short- and
long-term Treasurys -- threatens to crimp margins of big consumer
lenders.
(END) Dow Jones Newswires
March 21, 2019 12:56 ET (16:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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